Moneylife Event: How Customer-centric Bankers Approach Bank Charges
Moneylife Digital Team 24 May 2024
"Our philosophy as a cooperative bank has always been that we want to be a professional bank. Cooperative banks always strive to keep customers at the centre of their activity. Maybe they are found wanting in terms of compliances, but that is because of not having enough professionals within those banks," says Gautam Thakur, chairman of Saraswat Bank, while speaking at the public launch of Moneylife Foundation's comprehensive report on service charges by banks. Saraswat Bank was one of two cooperative banks that were placed in the best category (category A) when service charges were compared across a sample of 25 major banks. 
Explaining how cooperative banks like Saraswat Bank have a customer-centric approach in their business, Mr Thakur stated, "Being the leader in the cooperative sector, we know that whatever charges we fix, the other cooperative banks will follow. Cooperatives do not have profit at the centre of their activity, and that is why you will see that we place a high premium on the quality of service that we render — that is our business model."
He further added, "We are in a vicious circle of trying to prove how profitable we are, what our return on assets and return on equity are, and within this circle, ultimately, the one who is being affected is the customer. I feel it is for the bank boards to define how much profit is enough, and if you start there, you will naturally start working towards the betterment of the customer, employees and everybody else."
IDFC First Bank, AU Small Finance Bank and Bandhan Bank were found to be the best banks when comparing service charges across a sample of 25 major banks in India. While Saraswat Bank and SVC Bank were the two cooperative banks that were placed in the best category. 
What is perhaps a common theme that is present across these five banks is their customer-centric approach which reflects in the higher rankings they achieved in Moneylife Foundation's report.
Among other senior executives who attended the launch programme was Pradeep Natarajan, wholetime director of IDFC First Bank. Explaining their business philosophy, he said, "We kept the philosophy very simple and as I speak here, I speak on behalf of all my colleagues and our MD and CEO, Mr Vaidyanathan... the philosophy is really about customer centricity and it is generally a very difficult word to describe, but our philosophy has really been that we want to build a world-class bank, differentiated based on digital, social and being ethical."
Explaining how IDFC First Bank handles product launches with a customer-centric approach, he said, "We always talk about the fact that when a product manager makes a new product or creates charges, it should clearly pass the 'near and dear' test … will you be able to sell this product to your mother, to your father, to your brother, to your wife, to your husband, to your relatives and your close friends? And if it passes the 'near and dear' test, I think it is a good product."
IDFC First Bank is the only bank that does not charge for as many as 28 different services when a customer maintains the minimum monthly balance. This is again the result of IDFC First Bank's customer-centric approach. 
"I think we pioneered the concept of zero banking in this country. We have 28 different kinds of services and charges where we don't charge anything at all. We are the first bank to introduce the concept of monthly credit, and I think we are one of the first banks where we have a phenomenal amount of empowerment that we give to our people at the front end. If you call our customer service line and you have a problem with an issue or a charge, the amount of empowerment that the person has at the front end to be able to waive off a genuine issue, I think, is unparalleled, and we put it to test every single day," Mr Natarajan explained. 
AU Small Finance Bank was represented by Alok Mulye, head of products and communication, at the study's release event. He also expressed similar opinions on why a customer-centric approach is vital in banking.
"When the founder & MD talk about banking, the term we use in our office is generational banking. What we mean by that is that not only do we want the bank to last generations, but we also want our customers to bank with us for generations. We want our employees and their generations to work with us always. Now, when you have that as a goal or a guiding principle, the spirit of charges and the principle of keeping customer first becomes obvious. So guided by that logic, we always work on products and charges, which completely adhere to this principle, and that is what we go by."
Dr RD Barman, former executive director of Reserve Bank of India (RBI), who is also a statistician and an academic, was also present at the launch event. Speaking about the cost of digital payments and the need for more studies on service charges, Dr Barman says, "Banks have always been saying that we incur heavy costs for the digital payments. But where are your costing studies? In the public domain, we have not seen those costing studies … Earlier with any cost of conducting government business, a survey was always made."
Explaining the impact of arbitrary and unreasonable charges from a larger perspective, he explained how "any payment system is basically a public good and the economics of public good is different. It cuts across each and every person. Even 10 paisa charged to all citizens of the country, amounts to thousands and thousands of crores. Eventually, it becomes a social loss … what we call the consumer surplus and producer surplus. See, when cash disbursal happens, customers' costs are zero. Even 10 paisa is a move away from the consumer surplus towards a producer surplus. I think that kind of an economics study focusing on public economics is a must."
SS Mundra, former deputy governor of RBI, who launched the study, had an interesting suggestion of using technological advances to allow portability of bank accounts on a similar level of ease as phone numbers which can be ported from one telecom carrier to another. While it may not be as simple to implement such a suggestion within the banking system, it is certainly something worth considering, he says.
As Mr Mulye pointed out, portability or even studies on service charges would effectively work to keep banks in check. "I think that is going to keep all of us on our toes and every single time there is a study like this, we really want to be on top of it because, at the end of the day, I think it is really your customers who put you here and that is the big differentiation that we can bring about being absolutely customer-centric and being right and being sincere and being truthful to the customers that we serve."
4 weeks ago
I have account with AU bank, they do something fishy, they will never give any account statement within 1st to 7th of any month. Not physically, not by mail.
Ssammers paradise. We have stop operations in this bank for that
4 weeks ago
Based on findings of this study, the least RBI can do is to prescribe a maximum reasonable service charge for each type of service that banks offer.
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