After the new instructions of the Reserve Bank of India (RBI), the earnings of banks may be affected. According to banking sector officials, the ban on charging fees on some SMS alerts sent to customers may reduce the annual fee income of big banks by about Rs 300 crore. However, this will provide relief to customers as now they will not have to pay separately for such SMS.
RBI had said in its instructions issued on June 24 that banks cannot charge customers for SMS alerts related to compliance, awareness and promotional rules. Till now, most of the banks used to charge SMS charges of Rs 15 to 18 from customers every quarter to cover the cost of these messages.
Sending SMS on transactions up to Rs 500 now optional
RBI has also given relaxation to banks that sending SMS alerts on transactions of Rs 500 or less will no longer be mandatory. That means, if banks want, they can use other digital mediums instead of SMS for such small transactions.
However, big private banks like HDFC Bank, ICICI Bank, Axis Bank and Kotak Mahindra Bank can continue this facility for now. These banks believe that instant SMS alerts improve customer experience and are also helpful in reducing the possibility of fraud.
Expenses can be covered by increasing other charges
Experts say that now banks will not be able to recover SMS charges directly from customers. In such a situation, they can compensate it through other charges. This may include account maintenance charges, minimum balance charges or other banking fees.
According to an estimate, if a big bank has around 5 crore fee paying customers, then due to the discontinuation of SMS charges, it may suffer a loss of income of around Rs 360 crore annually.
Telecom companies will also be affected
The impact of RBI’s decision will not be limited to banks only. 60 to 80 billion commercial SMS are sent every month in India, of which a large number are related to small value transactions. If banks reduce sending SMS on transactions up to Rs 500, then the SMS business of telecom companies may also decline.
RBI has also allowed banks to use digital options like Google RCS, WhatsApp, in-app alerts and mobile push notifications as valid means. In the coming time, banks can use these platforms more to provide information to the customers.
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