Bank charges that eat your dividend

Last week, S.K. Garg from Chandigarh wrote to say that State Bank of India (SBI) had charged him Rs 40 to credit a dividend cheque of Rs 160 from Kirloskar Oil Engines; effectively, 25 per cent of his dividend was gobbled up by the transaction charge. SBI told him that the charge was justified because Vijaya Bank had not honoured the company’s dividend warrant.

Why should the investor be made to pay for someone else’s fault? Garg had received no answer to his query. He has now discovered that banks do not charge for electronic fund transfers (EFT), which is more or less correct. The Reserve Bank of India (RBI) website lists bank charges for electronic transfers, which reveal that most banks indeed do not charge for inward electronic credits barring IndusInd bank which charges of Rs 10 per credit and ICICI Bank which levies a tiny fee on inward credits to its corporate customers only. IDBI Bank is however the only one to impose a charge of Rs 25 per inward remittance under the National Electronic Fund Transfer (NEFT) System.

This finally explained to us the case of Girish Mittal who recently complained that IDBI Bank had charged his father Rs 25 for an electronic credit to his account at Baroda. After this paper reported the case, IDBI Bank told Sebi that it does not charge any fee for electronic credit. At the same time it refused to refund the money charged to Mittal, evidently because the branch had correctly debited the customer account.

If queries at the senior-most level of banks and regulators led to such confusing answers, what is an ordinary customer to do? Every customer who chooses not to contest wrong charges saying they are insignificant (most customers don’t) adds to the bank’s bottomline because it turns into a tidy sum when spread across thousands of branches and millions of customers.

While chasing Garg’s Rs 40 problem we also discovered that not charging for electronic credits might not last forever. The RBI has waived processing charges for NEFT transactions until March 31, 2007 and left service charges to the discretion of respective banks. Four months down the line, if RBI decides to charge processing fees, banks may pass the burden on to customers causing other problems.

After minimum lots for holding shares were scrapped, several investors own single shares of companies. In these cases, bank charges could eat up a significant chunk of the dividend without giving the investor an option to seek alternative modes of payment. Imagine how ridiculous it would be if the dividend received is lower than bank charges.

... contd.

Ads By Google

Message*	Maximum characters allowed

Name*		Email ID*
Subject*		Country*

TERMS OF USE:
The views, opinions and comments posted are your, and are not endorsed by this website. You shall be solely responsible for the comment posted here. The website reserves the right to delete, reject, or otherwise remove any views, opinions and comments posted or part thereof. You shall ensure that the comment is not inflammatory, abusive, derogatory, defamatory &/or obscene, or contain pornographic matter and/or does not constitute hate mail, or violate privacy of any person (s) or breach confidentiality or otherwise is illegal, immoral or contrary to public policy. Nor should it contain anything infringing copyright &/or intellectual property rights of any person(s).

I agree to the terms of use.