Saturday, April 5, 2014

Do the charges for SMS services being charged by State Bank of India are ethical?

Do the charges for SMS services being charged by State Bank of India are ethical?

To keep pace with the technology for safe banking, SMS alerts are issued as and when any banking transaction (credit/debit) take place. However such charges need to be levied not as a scope of generating revenue to their business. As a normal telecom users, the charges for SMS usage is Rs. 1.00 per SMS. However, the bulk SMSes cost something around Rs. 0.05 per SMS. Some of the banks even do not charge any money from their customers as it is a win-win situation for both i.e Banks as service providers and the customers on the other hand. Service Providers are benefitted as their liability also get reduced due to safe banking and the customer also get benefitted as he is immediately informed if some fraudlent transaction take place.

However a glaring example has come where the customer has carried out two transactions in one year namely one transaction of crediting online transfer to his account on 24/07/2013 and one debit transaction again online transfer on 25/07/2013. No other transaction took place during FY 2013-14. His bank namely State Bank of  India (SBI) charged Rs. 60/- from his account on account of SMS alerts which implies that an amount of Rs. 30/- per SMS has been charged.  State Bank of India have specified charging of SMS as:

"With effect from quarter ending June 2013, SMS charges of Rs.15/- (inclusive of Service Tax) per quarter will be recovered."

Referring to the above terms as stated by SBI:

1. These are the charges to be recovered that means the charges have to be on reimburseable basis and actual usage need to be charged.
2. If the customers has hardly two or three transactions in a quarter then how the charges of Rs. 15/- becomes recoverable. The charges need to be on actual basis.

A quote from Reserve Bank of India order No. RBI/2013-14/381
DBOD. No. Dir. BC. 67/13.10.00/2013-14 dtd. Nov 26,2013 on the subject is

"Accordingly, with a view to ensuring reasonableness and equity in the charges levied by banks for sending SMS alerts to customers, banks are advised to leverage the technology available with them and the telecom service providers to ensure that such charges are levied on all customers on actual usage basis." 

It is surprising that State Bank of India being the largest PSU Bank has not even cared about Central Bank i.e RBI order and is still charging the SMS charges from their customers with a minimum of Rs. 15/- per quarter. SBI issued their order for  rates of SMS alert service w.e.f 1st June 2013 whereas RBI issued directions on 26th November 2013 to charge customers on actual usage basis. Since RBI is the regulatory body for banking services in India, all banks including PSU banks are required to follow their directions/ regulations/advises. The charges in excess of actual usage can be very well termed as "Unethical Business Practices" and State Bank of India need to immediately look into such lapses. 

I have sent them a complaint through email on 2nd April and 4th April 2014 as well as using their online complaint handling system but the Bank has preferred not to respond till date. 

The banking customers normally does not notice such charges but if we see the size of the customership of the banks, such unethical charging must be  adding to crores of rupees. 

It is expected that State Bank of India (SBI) would soon realise such unethical business and decide to refund the excess amount being charged from their customers in violation of RBI rules. 

The link to the above article is being mailed to Chairman, SBI and RBI for their comment and shall be incorporated in the article on receipt of the same. 


  1. Despite the RBI mandate approving the actual charges to be levied for SMS,a lot of Banks both private and public sector, do not charge anything from their customers.(After all how many transactions would a SB Account holder do in a year.)It is sort of a service provided to the bank customer. SBI's charging is nothing but fleecing the customer.As it is their service standards are pretty low and then on top of it they want to charge.

  2. Not only SBI every Banks are charging for SMS alert, even some of Banks are charging Service Tax @ 12.36% on that issue, I have experience with UTI Bank in this matter, fortunately SBI refund back the Service Tax which they deducted on first time also ICICI are not claiming Service Tax in this issue.

  3. While State Bank of India has refunded the amount deducted on account of SMS alert services, it is expected that they might have implemented approach of charging SMS alert service on actual usage basis. The customer who feel they are being charged in excess of the actual usage may take up their complaints with the bank. I would be available to their help if they desire.