The action comes amid a renewed push by Indian banks to expand into retail lending in recent years, after a wave of corporate loan failures that left several bankrupt.
RBI Pushes Banks’ Fees
According to persons familiar with the situation, the central bank of India is pressuring lenders to reduce costs for certain consumer items, a move that might endanger the billions of dollars that Indian banks get from fees.
According to persons who asked not to be named in order to reveal private conversations, Reserve Bank of India officials have communicated to banks in recent weeks that they want to lower service fees, including those for debit cards, minimum balance breaches, and late payments. The RBI, which oversees the lenders, did not respond to inquiries for comment.
Banks Eye Retail Growth
The action comes amid a renewed push by Indian banks to expand into retail lending in recent years, after a wave of corporate loan failures that left several bankrupt. The retail market has been profitable for banks due to growth in sectors including personal loans, auto finance, and small company financing; nonetheless, the rate of development has drawn the attention of a watchdog.
According to the people, the central bank is especially aware of costs that disproportionately affect low-income clients in the most populated nation in the world. They said that banks are free to choose their own fees and that the RBI has not set a set range for them.
RBI Reviews Bank Fees
Bank levies do not have any set criteria. According to statistics produced by online financial marketplace BankBazaar, processing costs for retail and small business loans usually vary between 0.5% and 2.5%, with some banks restricting house loan charges at 25,000 rupees ($285).
After a period of weaker growth, fee revenue at Indian banks has begun to show early indications of recovery this fiscal year. According to statistics from India Ratings & Research, the measure increased from 6% in the preceding three months to 12% in the quarter that ended in June, or around 510.6 billion rupees, from the previous year.
According to the persons, the RBI may target over 100 retail goods that the Indian Banks’ Association is now discussing with banks. According to them, the central bank has also taken notice of the significant differences in costs that various clients pay for the identical goods.
When asked for comment, the industry advocacy organization did not respond.