Amid growing public debate over charges levied by banks for SMS transaction alerts, an existing Reserve Bank of India (RBI) circular has once again come into focus. The circular makes it clear that banks should charge customers for SMS alerts only on an actual usage basis, rather than imposing blanket or arbitrary charges.
The RBI issued the directive on December 6, 2013, to all Primary Urban Co-operative Banks with the objective of ensuring reasonableness and fairness in customer service charges.
In the circular, the RBI noted that banks are required to provide online transaction alerts to customers, particularly for card-based transactions, as part of measures aimed at enhancing customer security and preventing fraud.
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Recognising the availability of improved banking technology and telecom infrastructure, the central bank observed that banks should be capable of tracking SMS usage accurately. Accordingly, it advised banks to ensure that charges for SMS alerts are levied only on the basis of actual usage by customers.
The circular states that this approach is necessary to promote equity and reasonableness in the fees collected from customers for SMS services.
The RBI referred to its earlier guidelines issued in 2007 on ensuring the reasonableness of bank charges. Those guidelines required Urban Co-operative Banks to identify basic banking services and adopt transparent principles while fixing service charges.
The 2013 circular built upon these principles by specifically addressing SMS alert charges, noting that technological advancements made it feasible for banks to move away from uniform charges and instead recover costs based on actual customer usage.
The circular also reiterates that banks are required to maintain systems for providing online alerts for various card transactions. These alerts serve as an important customer protection mechanism by enabling account holders to detect unauthorised transactions promptly and report fraud without delay.
Under the RBI’s instructions:
- Banks should leverage available technology to monitor SMS usage accurately.
- Charges for SMS alerts should be based on actual usage rather than flat or arbitrary fees.
- The objective is to ensure fairness, transparency, and reasonable pricing for customers receiving SMS alerts.Â
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