The Hindu Business Line : It may really pay to `Know your Bank' better

Know Your Customer is the mantra banks are chanting, but what of the ways of the banks? Does the average customer know the intricacies of banking operations? Banking has gone hi-tech, but that has not made bank operations transparent. Indeed, many of the creative practices are conveniently blamed on the nameless, voiceless computer.

For instance, a customer of a private bank suspected that he had been charged excess interest for a month on a loan against shares, and sought the computation details.

The first reply from the bank was that all computations were done by the computer. The customer wrote back saying that his calculations were also done by a computer.

When the statement details were compared, it was found that while both the computers had processed the information fed to them, the bank had slipped in feeding in the right information.

Usually, banks compute the limits on the loan account every Friday and the customers are expected to maintain their account within the ceiling on that day, once a week; failing which additional interest is charged on the overdrawn amount.

`Wrong computation'

In this case, surprisingly, it was found that the bank was computing the limit daily, and charging additional interest. So, if the share prices fell on a day, and the account became overdrawn, the bank's computer would charge interest.

The rectification was done, but the point is a customer may oftentimes not know how a bank calculates what it owes to the customer and what is due to it.

Second, these days, banks do not provide an advice slip on either debits or credits. So, if a customer gets an inward foreign remittance, he would neither know the source nor the exchange rate at which it was credited to the account.

This lack of timely information from banks is a major area of concern. For instance, if a business enterprise deposits a bunch of cheques in a bank and if some of the instruments are dishonoured, the customer is not informed immediately. By the time the customer gets to know about it , it may be too late.

Worse, the bank would charge a fee for the cheques returned. Can the much-touted `banking software' not take care of such requirements of the customers?

Third, the so-called `anywhere banking' is great but the only hitch is that it comes at a stiff price; your bank statement would be loaded with charges if you have used the services of a branch other than the one you have an account with.

Credit card hassles

The less said about credit cards the better. It is all nice and sweet till a loan is sold, sometimes giving the impression of a low interest rate. But the happy situation lasts a couple of months, and suddenly, hefty interest rates are levied.

Banks also refuse to allow pre-payment, or charge a price for that too. In many a case, a fee is also charged on the amount outstanding at the end of each year.

Take a loan or use the monthly instalment schemes of credit cards and you face peculiar problems.

For automatically new accounts get opened, and when making payments you are expected to make apportionment to each account.

If you misquote an account number in which you have no dues at all, the bank would not set it off to the account where there is an outstanding, but give you a credit in the first, and charge a penalty on the other, even though it has an excess of your money.

The computer has also become a convenient alibi for not signing statements. Most often, bank statements carry this line: "This it is a system-generated statement and does not require any signature".

It makes one wonder if cyber laws allow computer-generated documents/letters to be issued without signatures. Perhaps, all statements cannot be signed by bank officials, but, surely, there is software that would allow affixing the facsimile of the signature of the appropriate official on important documents.

Then there is the inexplicable requirement that customers who have credit facility must service the monthly interest charges, even if there is sufficient unutilised balance in the loan account to cover the interest payment.

For instance, if a customer has a loan limit of Rs 10 lakh but has used only Rs 7 lakh. Though there is enough unused fund in the account, the customer would still have to make a payment for the interest charge, perhaps by drawing from the same account, but the bank will not adjust the account to reflect the drawal of the interest amount. So, shouldn't we say know your bank better?

(The author is CEO of Right India Consultancy House.)

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