Changing the Bank for Personal Account

Small but regular debits from your savings account or the tardiness of the staff which can no longer be put up, one has to think about changing the Bank. You are not offered the facilities you need or are being charged for those you do not use. It’s time to shift to a bank that suits your needs and matches your expectations.

Banks must care. They should care because angry customers could start walking out on them. If you too are contemplating changing your bank, first assess the reasons why you are doing it. Here are some key characteristics on which to assess your bank:

Quality of service

This is the most important of all. Does it take you ages to get a pass book updated at the bank branch? Are cheques credited to your account within the stipulated time? Is your bank following the ECS mandate given by you? If your bank’s service standards are not up to the mark, shift to one that matches your expectations. Generally, PSU banks tend to be tardy compared to private sector banks but remember that this improved customer orientation comes with a price tag. PSU banks require a very low minimum balance of Rupees five hundred while private banks insist on figures of Rupees. 5000/- and above. Move only if you are ready to pay that cost.

Product portfolio:

Is your bank providing the services you need? You may want to open a demat and stock trading account, but your bank doesn’t offer the facility. You may be interested in buying mutual funds, but there is no such option with your bank. Some smaller banks don’t even offer Net banking. This is a serious shortcoming because if you can access your bank online, you will be able to deploy the excess cash in more optimal investments such as short term fixed deposits. If your bank’s product portfolio does not match your needs, it’s time to switch.

There’s a flipside to this as well. Your bank could be offering services you don’t need or even want, but you are being charged for them. Or it could offer you a multi-city cheque book for a price even though you only issue local cheques.

The majority of Indian customers have not availed of various services being provided by banks. Only about 50% of active savings bank account holders in metros use their ATM cards and only 30% use their debit cards. Net banking is used by only 15% of the accountholders while a minuscule of the customers have taken to mobile banking.

High charges

For many customers of private banks the high charges are in contrast between costly but efficient services and cheap but poor delivery. One has to maintain an average balance of Rs30,000 in his account with a foreign bank, but the convenience of investing in mutual funds prevents him from moving away. One of the private banks has his EMI payments tied to it, so that too will continue and a third bank has his salary account. While private sector banks charge Rupees 800-1,000 a year for maintaining a demat account, PSU banks charge only Rupees 250-300. However, not all private banks charge high fees. IDBI bank offers a number of free services to its customers. Demand drafts are free and there is no minimum balance to be maintained.

Higher interest rates

Most financial planners will not recommend keeping a very high balance in your savings accounts. Yet, the RBI’s deregulation of interest rates on savings bank accounts has triggered a minor rate war. Already three banks are trying to lure customers with offers of a higher rate than the usual 4% offered by most banks.

Financial strength

Not many retail customers look at the annual report of a bank before opening an account. Not even a fraction of a per cent. This can be a grave mistake if you are opening an account in a little known private bank. Account holders in the Global Trust bank spent three days of suspense after the RBI asked the bank to close down operations following the discovery of grave malpractices. The horror story ended on a happy note because the troubled bank was merged with the Oriental Bank of Commerce and no depositors or account holders lost money.

The Deposit Insurance and Credit Guarantee Corporation now insures up to Rupees 1 lakh per customer in all banks. Still, to avoid any problems, it may be a good idea to shift your account to a bank that has a strong balance sheet and is not likely to shut shop. PSU banks are any day a safer bet than a private bank.

Earlier, customers used to continue with a bank out of loyalty and the personal relationship they had with the staff. Now, with many transactions not requiring any human interface, there is no personal relationship.