Modi Govt’s Financial Inclusion Spiel Turns Banks Into Loan Sharks

All banks have a savings account product with minimum balance requirements. If the minimum account balance (MAB) is not maintained, a fee is charged. However, in the interest of financial inclusion, the RBI mandated that all banks should also offer a no-fee zero account balance basic savings bank deposit account (BSBDA). But most banks cheat with a simple con – by converting the zero balance account into a regular savings account by resorting to what is called “implicit consent” and not an “explicit consent”, from the word go.

The implicit consent could be a single SMS sent to the applicant/new customer; enough to impose all sorts of penalties/charges on the targeted BSBDA account. The zero balance account holder/applicant finds he is a “slave” of the bank and has to follow dictates in the form of SMS and Whatsapp messages, failing which a penalty is imposed.

In fact, banks have played around with Pradhan Mantri Jan Dhan Yojana (PMJDY) accounts, which are also zero balance accounts, concept to extort. As on November 29, 2023, as many as 51.04 crore Pradhan Mantri Jan Dhan Yojana (PMJDY) accounts had been opened with a deposit balance of Rs. 2,08,855 crore. It was mandated to provide universal access to banking facilities and a basic bank account to every unbanked adult.

The zero balance PMJDY account does not require maintaining any minimum account. This is the same spiel given by commercial banks of various alphabet soups when soliciting customers for their zero balance accounts, banks such as SBI, HDFC, IDFC, ICICI, etcetera, etcetera. The banks violate their own rules and promises by openly harassing customers, who are lured into applying for these no-frills accounts only to find themselves victims of a scam that saps them financially as well as mentally and physically.

Take the story of Chinmaya Mund, who opened a zero balance 3-in-1 account with the ICICI Bank. After a year, the bank turned the account into a privileged account. The bank said that Chinmaya had sent a “SMS” and requested for the change. Then, after a month, Chinmaya got an email which said his MAB was Rs 1,50,000 and that he will have to pay for “not maintaining MAB.”

Chinmaya is not alone. There are tens of thousands of such victims. Zero balance account holders, who refuse to convert to MAB (minimum account balance), are harassed and coerced into “following the rules”. To close the account requires a personal visit to a bank branch and harassment of another level. “Sadly I wrote to them again and now I am closing my account with them. I got cheated. Dangerous bank,” wrote Chinmaya.

But this is a story after a customer opened a no-frills account; what about “AAK, who only applied for opening a no-frills account, a zero-balance account with the HDFC bank, which after hearing that HDFC would ask for a high minimum balance, decided not to pursue the application? AAK’s KYC details are with the bank and HDFC is coercing AAK to “complete the KYC” and pay the “minimum balance of Rs 10,000.”

Millions face daily harassment from banks which use the concept of no-frills account and zero balance account to lure people into applying for opening bank accounts and then using those accounts to extorting money from the “customers” by insisting that they will have to maintain a minimum balance of extraordinary amounts to avoid paying penalties running into thousands of rupees.

It is said that the zero balance account changed the face of banking in India. A clone of Pradhan Mantri Jan Dhan Yojana, which encouraged millions of faceless Indians to participate in the India growth story by opening bank accounts, the no-frills account is the PMJDY concept hijacked to serve the banks. Conversion of zero-balance to minimum required balance is at the press of a button.

But the consequences for the account holder or zero balance account applicant could range from phone calls at odd hours of the day and night, physical visits to home and office by dubious characters going by the description “loan recovery agents”, verbal and physical altercations with relatives of the “account holder” and demands made on them, banks could go about this with relentless pursuit.

In one word, it is ‘Extortion’ and woe betide the individual who does not make the required minimum account balance payment and maintain it till hell freezes.

Any help forthcoming? Forget it. If RBI is the last resort, the RBI’s right hand doesn’t know what its left hand is upto. In 2018, the RBI led a SMS and advertisement campaign to promote no-frills accounts, totally unaware of the harassment — either by conversion of zero balance accounts into regular minimum balance accounts or by freezing zero balance accounts after four transactions are made.

A study of the Indian Institute of Technology Bombay (IITB), found that banks were quietly converting BSBDA to fee-based regular accounts with high minimum balance requirements or charging a penalty if the customer makes a fifth digital payment transaction in a given month. What customers don’t realize is that the account remains “converted as a regular savings account” thereafter and will have to maintain a minimum balance amount in the account for all time. What angers customers is the Modi government’s total inaction.

Millions upon millions of bank customers were hit when banks cloned PMJDY and extorted money from unwitting customers. The ease in digital transactions was their waterloo. The State Bank of India alone debarred 13 crore BSBDAs from making more than four transactions in a month. With millions of such accounts under BSBDA and PMJDY, talk of digital financial inclusion was a joke.

Customers have to be forever on their toes, wary of not making more than four transactions in a month even as the banks were converting BSBDA into minimum balance savings accounts after a fifth transaction per month. For the account to be charged a recurring penalty every month thereafter is a fait accompli. The fees charged every month for non-maintenance of minimum balance that the customer was not told about at the time of entering into a relationship with the bank is criminal, but is allowed to proliferate.

Customers like Chinmaya Mund and AAK are harassed and punished for no fault of theirs. The customers are not given an “explicit option” at the time of applying for a zero balance account. Banks cannot put a bar on more than four free debit transactions in a month. A recurring charge in the name of maintaining a high minimum balance requirement is rank exploitation. The whole thing about taking “implicit consent” instead of “explicit consent” from the zero balance account holder is to the bank’s advantage. Banks consider an implicit consent enough to convert a BSBDA to a regular account – the implicit consent in the form of an SMS. Such a cavalier approach is highly dubious, and unethical to boot. (IPA Service)