Fees and charges of banks need to be rationalised

The cost of doing business has different components, a number of them are well discussed and some are not at all. In the doing business ranking of the World Bank Group in 2015, Bangladesh slipped three points behind the level of 2014. In 2015 the country's ranking slipped to 173 from 170. While Bangladesh has graduated from a low-income country to a lower middle income-country, this is one of the serious concerns. The most important area where Bangladesh performed worst is in getting credit. In this area the country slipped six points behind that in 2014. The ranking was 125 in 2014. But it slipped to 131 in 2015. When it comes to starting a business, Bangladesh has slipped four points behind that of the previous year. From 111 in 2014 it has slipped to 115 in 2015. Components of the starting business index, among others, include getting credit.
 Banking services are considered the first-order financial services. Commercial banks are one of the main sources of credit meeting the need for financial services. Interest rates are high in Bangladesh. If the high costs of charges are added to the rates, it will be more than the double-digit interest rates. Banks are one sophisticated area that provides financial services. But what is the percentage of people getting access to the services, when costs of the services are high? A recent survey of the Bangladesh Bureau of Statistics (BBS) shows that only 28.6 per cent people have bank accounts. Probably people are a bit afraid of having bank accounts because of the procedural complexity.
Financial exclusion is one of the reasons for economic polarisation of vulnerable communities and it bars access to finance, especially for small businesses. In view of it, not only the types of bank charges but also rates are one of the concerns of the existing as well as potential financial service users.
Different commercial banks have various scheduled charges. They vary from one bank to another. Banks charge for general banking, credit, foreign exchange, online banking, etc. The Business Initiative Leading Development (BUILD) recently conducted a study. It shows that while Trust Bank has 176 types of charges, EXIM Bank has 55 and NRB 112. The SIBL and NCC have 36 types of charges each. Types of services do not matter most, if the rates are rational. It is seen that rates are different and they vary from one bank to another. This is apparently one of the reasons why people are indifferent to services from banks and financial institutions.
The Bangladesh Bank (BB) has rationalised charges for some services to uphold the interest of depositors, investors and customers and advised all banks and non-bank financial institutions (NBFIs) to display the complete list of charges at visible places at their branches and head offices. This will help the clients to know the actual amounts of costs in addition to the interest rates charged for services provided by the banks and financial institutions.
According to the F.F. Circular No. 16 dated 31-03-1982 and the BCD Circular No. 7 dated 12-3-1986, the banks are free to fix the fees and commissions for their services to customers. And this is one of the reasons for the numbers and amounts of charges varying from one bank to another.
According to the circulars, there should be no discrimination of customers in applying the fees for similar services. In other words, all customers are required to be treated at par for similar services. Each bank will prepare its schedule of charges and commissions, etc. and ensure that these are publicly accessible at each branch. Each bank will forward to the BCD (now BRPD-Banking Regulation and Policy Department), Bangladesh Bank, a copy of the schedule of charges and commissions.
The BB monitors this issue and banks and NBFIs are required to submit semi-annual statements in this regard. No charge or commission like commitment fee, supervision fee and cheque dishonour fees can be charged. The problem is: there exist different ranges of charge for different banks. No regulation or policy has yet been set by the BB. There should be the same number of charges and the same number of their categories for all commercial banks. It will help the customers get fair and transparent services from banks. On December 22 in 2009 the BRPD circular no. 19 was published by the BB. In the circular the BB declared that no account maintenance fee should be charged for any account which contains Tk 5000-25,000. There should be an annual charge of Tk 200 for any amount beyond this limit.

If the charges are compared, then it will be observed that many of the charges are different from one bank to another. But most of the clients are not aware of these charges, though the list of charges can be found on the website of every bank. As most of the clients do not check or analyse any bank's charges, they remain unaware about the difference of charges. Only for LC (letter of credit) opening, 25 types of charges are there in a particular bank. Some special types of charges like commission for LC, amendment of LC and SWIFT code use can be easily lowered and made simpler.
For a single LC the cost is about 3.0 per cent (if the amount of LC is Tk 1.0 crore or 10 million). It increases the cost of doing business. In order to reduce the cost of business the rates and areas of charges should be reduced. The charges need to be rationalised for encouraging more people to get financial services. The BB should maintain the same structure for all commercial banks so that clients can avoid discrepancy and over-regulations.
Therefore, a fixed number of charges and the same rate have to be put in place for all the banks so that the clients get the benefit of it by avoiding any kind of discrimination. Of course, clients are free to move from one bank to another for better prices. But the change of banks will not work, unless the services are changed. In most of the cases clients rely fully on the banks and financial institutions for these services without any justification for the choices.
In India some of the banks do not levy charges on each individual product or service. Products and services are bundled and offered to a customer as a composite offering. The bank recovers the cost of these operations through the net interest income. As per the master circular on Customer Service 2014, banks will provide advance information to individual customers about any proposed change in the service charges. In the circular they have mentioned the processes of how they will notify the customers about any changes in the charges.
In Bangladesh also this notification system should be introduced in the event of any change in the service charges and also a composite bundle offer should be made to the clients.
If amendment charges are added to the costs, the repeated amendments can increase such costs. It is, of course, true that it may happen because of the fault of the exporting and importing banks and the client. But the amendment costs are too high and a business may become risky in the event of the high costs of repeated amendments.
The BUILD presented a paper in its 5th Financial Sector Working Committee Meeting on June 24 last. It was chaired by the Deputy Governor-1 of the BB. Private sector representatives were vocal at the meeting. They raised different issues. The BUILD recommended that banks should notify or inform their customers and clients of the intending service charges. Banks need to identify the basic banking services on the basis of broad parameters so that customers can remain aware of these charges. The BB could circulate a range for the service charges. And it should be commonly used and should be open to the public. It can be charged for issuance of cheque books, bank statements, account opening, withdrawal of money etc.
Products and services are offered to a customer in a bundle in India. In South Africa there is a National Credit Act which not only caps interest rates but also the fees on different loans. We at least can have a policy for rationalisation of the fees and charges.
The writer is Chief Executive Officer (CEO) at the Business Initiative Leading
Development (BUILD).  ceo_build@outlook.com