Here's how HDFC, ICICI, Axis banks & others can reward customers for ending free cash withdrawals

HDFC Bank, ICICI Bank and Axis Bank, the private sector triumvirate, have served notice on their savings account deposit holders—only four cash deposit and withdrawal transactions per month starting 1 March 2017 would be free; a minimum fee of Rs 150 per transaction will have to be paid if this limit is breached. Who knows, Kotak Mahindra Bank and Yes Bank might tweak the cash transactions fees regime to break free from the herd mentality as they did when savings interest rate regime was freed up some five years ago by boldly announcing a 6 percent per annum interest as against the norm of 4 percent. And BTW, isn’t Rs 150 per transaction excessive? The first violation should attract Rs 100, the second Rs 125 and the third violation Rs 150 and so on. Bank cash transaction charges come smelling of roses vis-à-vis the still-born move to impose a banking cash transactions tax (BCTT). Taxes reek of punishment whereas charges pass muster howsoever grudgingly as being necessary to run an establishment. Be that as it may but the issue is why banks which have wielded the stick on cash transactions beyond reasonable limits, forgotten to offer carrot to the account holders ungrudgingly. True, Kotak for example has offered a small carrot—-spend Rs 25,000 at least a month with card and earn Rs 600 but that is a tall order for an average householder. It is one thing to ask a customer to embrace card payments but quite another to ask her to splurge. [caption id=“attachment_3205734” align=“alignleft” width=“380”]  Representational image. Reuters[/caption] Banks which have in a manner of cartelisation ushered in the bank cash transaction charges regime should similarly enlist enthusiastic customer support for the digital payments regime with the following incentives for example: 1) A business is allowed to carry forward its losses for eight years by the income tax law. Likewise banks should allow customers to carry forward their unused quota of four free withdrawals to subsequent say 12 months because an exigency like marriage or death in the family makes frequent cash withdrawals necessary and inevitable. Hitherto ICICI was viewing quarter as its oyster. In other words, 12 free withdrawals per quarter was its rule. But carry forward regime for 12 months would be more reasonable and rational. 2) It is all fine to exhort state-owned insurers and railways to offer a small rebate on digital payments but shouldn’t banks themselves reward their customers for embracing the digital mode of payment? After all, digital payments result in considerable savings in overheads for banks. In all fairness a small fraction of it should be passed onto the customers without putting in too many stiff conditions like minimum card spend. Some airlines have stopped imposing the invidious and irrational convenience fee for doing digital payments for online ticket booking realising belatedly that it is the customer who is doing them a favor by booking himself. This message should percolate to everyone benefitting from digital payments. 3) Debit card annual charges sends wrong message. ICICI bank for example imposes Rs 99 as annual charges. This smacks of as meanness and anti-card mentality in a milieu where digital payments are encouraged. 4) Those doing net banking do a greater favor to banks than those doing card payments because for the latter banks and establishments pay service providers like Visa, MasterCard, rupay etc a percentage based fee. Net banking comes absolutely free. Therefore a suitable incentive regime for transactions done through net banking must be designed for savings bank account holders. As a corollary to the crackdown on cash transactions, as it were, banks should follow up soon with closure of at least 50 percent of ATMs that have mushroomed in a spirit of me-too across the urban landscape. Many of the ATMs gather dust existing as they do cheek by jowl with other ATMs.