This is how banks fleece you

Is your money safe in the bank? That's what everyone thinks, as did 31-year-old Mukesh Verma, a medical technician in Ashwini Hospital, in Coloba, Mumbai, until he saw a withdrawal of Rs 2,666 from his account that he had no clue about.

"Just after we took a housing loan (on October 9, 2006 from the Ashwini Hospital branch of Syndicate Bank), we discovered that Rs 2,666, over and above the EMI, had been debited from my savings account," recounts Verma. Upon checking, he found that it was the premium for an insurance policy that was signed by them as a part of the loan agreement.

Biting charges:

"The bank should have at least told us that the loan agreement also had an insurance column," he says. After several letters to both Syndicate Bank and the Reserve Bank of India, he finally managed to get the bank to agree to cancel the insurance.

No free lunches. Your bank might be offering you more services than ever, but someone has to be paying for them. And more likely than not, it is you. So, feel free to ask. Also, read forms you sign.

Till 1999, the Indian Banks' Association used to fix charges. But since banks were freed to have their own charges, numerous charges have crept in. It is pretty difficult and, often, unnecessary to track them all. In most bank branches, charges for regular services are displayed fairly conspicuously.

What is not as much in public display are the penalties, such as those levied for not maintaining the minimum balance and quarterly average balance and overdrawing from the savings account.

According to a BBC report published in December 2006, that year, the top six high street banks in the UK earned an estimated pound 4.5 billion (approx Rs 36,000 crore) only from penalty charges incurred for unauthorised overdrafts, bounced cheques and clearing direct debits when there are insufficient funds in the account.

While no such figure is available for Indian commercial banks, industry sources estimate that it could be around Rs 3,000 per annum for an account in a private sector bank. (See: Biting charges). For the banks, it is like hitting the jackpot.

Most of the time banks ignore to disclose these bits of information when it opens an account. And unless you reconcile your accounts, you will never find out. Shailesh Prabhu, 25, a fashion designer in Mumbai, opened a savings account in the Dahisar branch of the Corporation Bank over a year ago. He is still to be told that the debit card he was given costs him Rs 75 a year.

If you accept the bank's offer to send you SMS alerts, you will probably pay for it too. Many banks are still to abide by the RBI directive to issue passbooks to all account holders. Quarterly statements are sent by snail mail and you have to pay extra for a duplicate.

Even if you are the proud owner of a passbook, updating it anywhere except the home branch can cost you a bundle. Some banks even go to the ridiculous extreme of charging you for interest certificates for your savings and term deposits.

Things to do

• Close accounts you don't use. If you open one as a requirement for term deposits, go for a no-frill account. But even one of these, if it lets you have a zero balance, may charge you for frequent cash withdrawals. The cheque facility is also free only up to a number of cheques.
• Check every service you are using and ask the bank whether they are costing you anything.
• Overall, use ATMs, Internet banking and phone banking. Most of it is free and can save charges for services such as 'stop payment' of a cheque, or transferring money from one bank to another when the amount is above Rs 100,000.
• Maintain quarterly average balance at all times. Keep track of automatic payouts and post-dated cheques. Else it could cost you up to Rs 750 in a private bank. Also, a bounced cheque can lead to criminal prosecution under law.