Daijiworld Media Network - Mumbai

Mumbai, Sep 19: The Reserve Bank of India (RBI) has urged lenders to reduce fees on retail banking services, including debit card charges, penalties for minimum balance violations, and late payment fees, sources familiar with the matter said.

According to reports, RBI officials recently communicated to banks their concern that such charges disproportionately affect low-income customers, who form a large segment of India’s banking population. However, the central bank has not prescribed fixed limits, leaving the discretion to lenders.

The move comes at a time when fee income has become a crucial revenue stream for Indian banks, with collections rising 12% year-on-year to Rs 510.6 billion in the quarter ending June, according to data from India Ratings & Research.

Currently, processing fees for retail and small business loans range between 0.5% and 2.5%, while home loan charges are capped at around Rs 25,000 in some banks. The Indian Banks’ Association (IBA) is also holding discussions with lenders on over 100 retail products that could come under the RBI’s scrutiny.

The central bank’s move coincides with the growing reliance of lenders on retail lending segments such as personal loans, vehicle financing, and SME loans, after years of stress in corporate lending.

By pushing for a cut in retail service charges, the RBI aims to ease financial stress on small borrowers while ensuring fairer practices in the fast-expanding consumer banking market.