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Rediff News  All News  » Business » Cap charges for small borrowers: Damodran panel

Cap charges for small borrowers: Damodran panel

February 09, 2011 10:55 IST

The Damodaran committee appointed by the Reserve Bank of India (RBI) to revisit the issue of banks' customer services is likely to recommend capping on service charges to small borrowers or vulnerable sections of society.

RBI does not prescribe charges and interest rates for banks, while stressing these should be fair. The committee feels a cap is needed for the low income segment.

The panel is headed by M Damodaran, former Securities and Exchange Board of India chairman. Its report is expected soon.

The mandate was to prepare a forward-looking document, to be relevant for the next decade.

More, the central bank is likely to restrict charges for non-maintenance of minimum balance. According to sources, banks may not be allowed to charge more than the shortfall in the minimum balance requirement. Some banks charge as much as Rs 750 if the minimum balance falls short by even a small amount.

In 2008, RBI had mandated that charges on cash withdrawal from other banks' ATMs beyond five transactions were to be capped at Rs 20.

This was a rare instance when RBI mandated a cap, as banks were charging up to Rs 55 for cash withdrawal from non-base bank ATMs.

A frequent complaint the ombudsman's office of the central bank receives is on transactions at ATMs.

A growing number of customers said despite funds not having been withdrawn, the amount gets debited from the account.

RBI is now planning to mandate that banks have to prove the customer received the funds.

According to sources, the issue points to the larger issue of old cyber laws losing significance in the fast changing sector. The customer service committee is expected to highlight the need to re-look at the cyber laws.


BS Reporter in Mumbai