SBI plans to take charges for no-frills accounts transaction

Country’s largest public sector lender, State Bank of India (SBI) is thinking of taking charges from no-frill account holders for every transaction they conduct to make operation of no-frills accounts opened under the financial inclusion plan possible.

An anonymous senior SBI official involved in its financial inclusion initiatives said that the bank will be taking nominal charge which can be either a percentage of the amount transacted or a fixe amount and this will not discourage people from operating no-frills accounts.

The official said, "The question on our minds is -- how do we make the operations of the model feasible? We can recover the Rs 20,000 required for setting up infrastructure in a village through a kiosk or palm-held device by opening around 100 accounts and charging Rs 200 as account-opening fees."

He said although the plan has not been finalized but people will prefer to pay a small amount like Rs3 for a transaction than travelling 20-kilometres to reach a branch.

He added, "You cannot have a model under which the financial inclusion roll-out is subsidized, it needs to be sustainable."

He told, there are some persistent expenses like maintaining the back-end systems and paying the business correspondent (BC) who is operating on behalf of the branch at the village level, of which bank has to take care.

Bank will do campaigning through multiple media which will help in increasing public interest in being a part of the banking system and assuage any concerns.

Regarding, whether such move will face any regulatory hurdles, the official said, "Though the regulators have given us all the freedom, it is very difficult to say (what their reaction will be)."

Bank financial inclusion plan also includes opening of last mile banking infrastructure at village level to get the local population into the formal banking system.

Earlier this year, in his budget speech Finance Minister Pranab Mukherjee had said that all the 60,000 unbanked villages having a population of over 2,000 will be covered by March 2012, and the public sector banks were allotted these villages.
The banks need funds to invest in traditional brick-and-mortar branches, therefore banks are outsourcing the operations to non-bank financial companies by appointing them as BCs to look after the operations.