From 1st November 2020, the Bank of Baroda announced to impose a service charge. These charges are for withdrawals or deposits. Bank of Baroda reduced the number of cash deposits and withdrawals from 5 each per month to 3 each per month. Any excess transaction would have incurred service charges.
RBI & MoF Intervention:
Ministry of Finance cleared the rumor about charges against cash withdrawals and deposits. Finance Ministry proclaimed that charges are not applicable to certain accounts. This includes 60.04 Crores Basic Savings Bank Deposit (BSBD) accounts. These BSSD accounts also include 41.13 Jan Dhan accounts. RBI clarified that PSB has decided to withdraw such charges.
As per the guidelines of RBI, all banks, hold the right to levy charges (like MCLR, SMS charges). The imposition of charges is on the services provided by the banks. In the current situation, many banks proposed not to increase service charges. These charges could have affected the general public. But, those who are dealing with a high volume of transactions will have to pay a service charge.
This move, when announced, came as welcome as well as a pain point. It could have fostered the digital transactions ecosystem in the country. Digital transactions have expanded their scalability in recent times. Any digital transaction provides a form of trail left. This helps to enhance the accountability of transactions. So, it helps to formalize the economy by taking data in the system. It lacks in open cash with fake receipts. As per the NPCI report, a total of more than 2 billion UPI transactions worth Rs. 3.86 lac Crore registered in October 2020.
Yet, it would have created a dent if applied to Jan Dhan’s account holders. BPL groups depend on hard cash. The BPL groups are in rural areas. There’s not much awareness about digital payment platforms. In retail transactions, India lacks behind by having 3.4% penetration.