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Thursday March 28, 2024

SBP advises banks to avoid introducing products to bypass regulatory restrictions

KARACHI: The State Bank of Pakistan (SBP) on Tuesday advised banks to avoid offering products and services with slight changes just to bypass regulatory restrictions pertaining to collection of service charges.Banks have also been advised to avoid fixing fee / charges on expert judgment or a percentage rise over the

By our correspondents
January 28, 2015
KARACHI: The State Bank of Pakistan (SBP) on Tuesday advised banks to avoid offering products and services with slight changes just to bypass regulatory restrictions pertaining to collection of service charges.
Banks have also been advised to avoid fixing fee / charges on expert judgment or a percentage rise over the previous year charges.
The central bank has asked the banks to develop policies and procedures for determining their schedule of fee / charges, which should be reasonable and commensurate with the service being provided.
The central bank said the banks have been allowed to determine on their own the rate of charges in respect of various services provided to their customers; however, the fairness of charges imposed on the customers remained a challenge as divulged from complaints received from the consumers.
“Accordingly, it has become imperative to inculcate fairness in determining services charges. In this backdrop without being prescriptive, the SBP has set guidelines in the light of which all banks have been required to develop / tailor their systems and processes for determining their schedule of charges,” the SBP said.
According to the instructions, fee / charges fixed by the banks should fall within the proximity of what other bank charge for the same service and there should be some empirical analysis, which substantiates the fixation of charges.
The charges should be determined on the basis of cost of doing business plus a reasonable margin. Where a bank increases its fees by 25 percent or more for any service, it should document the reasons / justifications and make available the same to the SBP inspection team.
The banks have also been advised to act fairly, while recovering the charges. Where the bank has more than one option, the collection and appropriation of charges should be done in a manner, which goes in favour of the customers instead of the bank.
Furthermore, for services rendered through third parties such as repossession of vehicles, valuation of property, credit reports, etc, the banks are required to recover from the customers the actual charges / cost incurred by them.
Issuance of tax certificate, collection of small denomination currency notes, etc, are legal obligations on the banks. Imposition of charges on the provision of such services should be avoided; the central bank said and strictly advised the banks to take into consideration the legal enforceability of the charges, while recovering the same. — Javed Mirza