Higher processing fee, interest - Here's how banks are making money amid COVID-19 as customers suffer

Amid the coronavirus outbreak, private and public banks are looking for new ways to make money even as COVID19-hit customers face tough times.

From convenience fee on recycler machines to processing fee, banks are not letting go any chance to make money.

Few days ago, ICICI Bank started charging a convenience fee from its customers if they deposit cash in recycler machines after business hours on normal days, and on bank holidays. The new rules came into effect in November.

Bank of Baroda also announced to impose higher cash handling charges on customers but the bank later announced that it is withdrawing the decision.

For its part, Ministry of Finance issued a clarification saying no public sector bank has increased such charges recently and the ministry has been informed by banks that they are not planning to raise charges in the near future.

But ICICI Bank is still conitnuing with the convenience fee anyway.

“Effective November 1, a convenience fee of Rs 50 per transaction, will be levied on cash deposited in the cash acceptors/ recycler machines on bank holidays and between 6 P.M. and 8 A.M. on working days,” ICICI Bank said in a communication to its customers.

“The convenience fee would be applicable if the cash deposit in the cash acceptor / recycler machines exceeds Rs 10,000 per month either as single transaction or multiple transactions,” the lender added.

Debt recast processing fee

Private banks wasted no time in understanding this fact that the one-time debt recast scheme approved by the Reserve Bank of India in August to help the people amid coronavirus crisis, is an opportunity to make money. The scheme approved by RBI was applicable for all borrowers who were affected by coronavirus outbreak.

It is to be noted that some private banks are charging a fee as high as 0.5 per cent of the loan outstanding, said banking industry sources. 

Lenders have also announced to waive processing fee on fresh loans, fully or partially, particularly during this festive season.

Higher interest rate

Both public and private banks are also charging higher interest rates for the debt recast. State Bank of India (SBI) is charging an additional 35 basis points (bps) while majority of private banks are charging up to 50 bps higher rate. 

Banks are justifying the move by claiming that they are charging higher rates as there is a provision requirement of 10 per cent for the loans that are restructured.

Sources said that some private banks are charging 50 bps more for loan recast, while some are also charging as high as a full percentage point.