RBI Deputy Governor K C Chakrabarty differs with FinMin, opposes free e-fund transfer

MUMBAI: Within a fortnight of the Finance Ministry asking banks to make electronic fund transfers free of cost, RBI Deputy Governor K C Chakrabarty today said the banking regulator is firmly of the view that the plan should not be implemented as it is commercially unviable.

"We firmly believe that anything that is free of charges can never be scaled up, it cannot be made robust unless there is commercial viability...I don't think anybody will be able to provide this service free of cost; this is just not possible," he told reporters on the sidelines of a CII-organised banking technology summit here.

After a meeting with the chiefs of all public sector banks, the then Finance Minister Pranab Mukherjee had said electronic fund transfers under Rs 1 lakh should be made free as "we proceed to being a paper-less economy".

Such a move will also help remittances and cash transfers of governmental payments directly into beneficiary accounts, experts said.

Elaborating while speaking to reporters, Chakrabarty reminisced about the RBI experience when it had made automated teller machines (ATM) usage free, saying people were using it just to check account balances.

"Anything which is often free in this country is misutilised, we don't understand the value of a product or service," he said, stressing on commercial viability aspect.

Chakrabarty, however, qualified his remarks, saying while it does not refer making the service free, banks should also not charge customers in an "exploitative" manner.

Asked about the Finance Minister's request to make the NEFT transfers free, SBI Chairman Pratip Chaudhuri said, "its a Rs 5 charge, what are we talking about? I think it is too trivial."

He said the charges should be compared with the money order alternative, wherein sender is charged a fee of Rs 250 for an amount of Rs 5,000 whereas the banks charge just Rs 5.

Central Bank of India CMD MV Tanksale said objectives of the Finance Ministry and banks are not divergent.