The RBI, on Tuesday, asked banks to charge customers for transaction SMS alerts on the basis of usage, instead of imposing a fixed fee, to ensure equity and to be reasonable.

“Banks are advised to leverage the technology available with them and the telecom service providers to ensure that such (SMS) charges are levied on all customers on actual usage basis,” the Reserve Bank of India said in its Second Quarter Review of Monetary Policy 2013—14.

It said fees based on actual usage are necessary to ensure reasonableness and equity in charges levied by banks.

In March 2011, the RBI had set guidelines for banks to send online alerts to customers for all types of transactions, irrespective of the amount. However, the central bank had not issued rules on charging customers for these alerts.

Earlier in the year, State Bank of India imposed an annual charge of Rs 60 for SMS alerts, a step followed by lenders such as Canara Bank. Other PSU banks, including Punjab National Bank, State Bank of Patiala, IDBI and Vijaya Bank, have also been levying a fee for SMS alerts.

Inflation-linked 10-year savings scheme

The Reserve Bank of India plans to launch soon a 10-year savings instrument that will offer inflation-linked returns to small investors as an alternative to investing in gold.

“It is proposed to launch Inflation-Indexed National Saving Securities (IINSSs) for retail investors in November/December in consultation with the government,” the RBI said in its Second Quarter Review of Monetary Policy 2013-14.

The inflation-indexed securities for retail investors will be linked to the new (combined) Consumer Price Index (CPI). The interest on these securities would comprise a fixed rate plus inflation.

“Interest would be compounded half-yearly and paid cumulatively at redemption. These securities will be distributed through banks to reach out to the masses,” the RBI said.

Eligible investors would consist of individuals, Hindu Undivided Families, trusts and charitable institutions.

Banks can pay interest at shorter intervals

Savings bank account and term deposit holders can now earn interest at shorter intervals, with the Reserve Bank allowing banks to revise the periodicity of interest payments.

“As all commercial banks are now on core banking platforms, it has been decided to give banks the option to pay interest on savings deposits and term deposits at intervals shorter than quarterly intervals,” the RBI Governor said in its Second Quarter Review of Monetary Policy 2013-14.

At present, banks are required to pay interest on savings and term deposits at quarterly or longer intervals.

The savings deposit rate for most banks is 4 per cent per annum, while in some cases, it is as high as 7 per cent.

The interest rate on savings bank accounts is calculated on a daily basis. Term deposit rates are 8-9 per cent for tenures of one year and above.

In 2011, the RBI decided to give freedom to commercial banks to fix savings bank deposit rates, the last bastion of the regulated interest-rate regime.

While giving banks this freedom, the RBI had said a uniform rate will have to be offered on deposits of up to Rs.1 lakh. On higher amounts, banks are allowed to offer differential rates to depositors.

Only Rs.50,000 in cash for at-par cheques

To mitigate the risk of money laundering and terror funding, the Reserve Bank has asked banks not to pay more than Rs.50,000 in cash to customers holding at-par cheques.

Regional rural banks and co-operative banks are advised to utilise the at-par cheque facility only for their own use and payment of cash should not exceed Rs.50,000, the RBI said in a notification.

All transactions of Rs.50,000 or more should be strictly by debit to the customer’s account, it said.

Guidelines on foreign banks coming

The Reserve Bank will soon come out with comprehensive guidelines on foreign banks to encourage them to convert into wholly-owned subsidiaries (WOSs) and enjoy near-national treatment.

“While it will not be mandatory for existing foreign banks (that is, banks set up before August, 2010) to convert into WOSs, they will be incentivised to convert into WOSs by the attractiveness of the near-national treatment afforded to WOSs,” RBI Governor Raghuram Rajan said in the Second Quarter Review of Monetary Policy 2013-14.

The initial minimum paid-up voting equity capital or net worth for a WOS shall be Rs.500 crore, Dr. Rajan said, adding, “It is proposed to issue the scheme by mid-November.”

Such WOSs would be treated on a par with domestic banks, including in the matter of opening branches.

The RBI is working to nudge large foreign banks with 30 or more branches in India to get incorporated locally. These banks are open to the idea of local incorporation provided they get a level-playing field with local banks and a waiver on stamp duty.

Expert group meeting on new bank licences

Former RBI Governor Bimal Jalan-led high-level panel, which will scrutinise applications for new bank licences, will hold its first meeting on November 1, the RBI Governor said.

There are 26 applicants for new bank licences, including Tata Sons, and firms controlled by Anil Ambani and Kumar Mangalam Birla. Among public sector units, the India Post and IFCI have submitted applications.

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