The apex bank has received a proposal from a committee of representatives from the central bank and the two existing banks to reduce and unify banking charges.
According to the report, banks were charging “exorbitant bank service charges” and more so the liberty to determine the rates “were left to the individual banks.” The new charges which has dropped by 30% from previous charges has come into effect.
An official of the Royal Monetary Authority said that the move has been called in following persistent complaints from customers about the service charges.
Anonymous complaints to the Prime Minister’s Office followed by suggestion to the central bank saw representatives from Bank Of Bhutan, Bhutan National Bank, and the Royal Monetary Authority, called the working group, propose a new list of service charges for banks.
“The complaints were not made formally but it was persistent and so we thought that something must be done,” said Phajo Dorji of the RMA.
However, he said that RMA being the central bank should initiate the move but ultimately the competition must be set by the market forces.
“It is not a directive from the RMA, it is a simple initiative,” he said.
He said that with the entrance of two more commercial banks, the Druk PNB and Tashi bank service charges are expected to further decrease.
According to the report which was submitted to the RMA, Bank Of Bhutan limited (BOBL), the first bank in the country applied service charge that were functional to the State Bank of India (SBI), the bank which helped in the establishment of the BOBL back in 1968.
BNBL was established as a competitive commercial bank but service charges remained sky high.
“Two market players somehow colluded and monopolistic behavior submerged the markets,” states the report.
Further the report said that Bhutan National Bank “truly and without doubt imitated the service charges of the Bank of Bhutan’s existing charges,”
According to sources, Bank of Bhutan hasn’t made any changes or a few slight changes were effected in the service charge rates over the span of 4 decades. Similarly, Bhutan National Bank’s service charges remained unchanged since its inception as a commercial bank in 1997.
“The service charge rates that were applicable to SBI then were directly applied to Bank of Bhutan without actually assessing the cost components and other factors that required attention,” the report states.
“The trend of high service charges simply carried on over the years; and it is timely for the banks including the RMA, being the regulatory and supervisory authority, to review keeping in view of the changing business scenario.
Phajo Dorji who is also a member of the working group, said that the members deliberated and discussed the issue for a week, considering the lower and middle income segment customers.
However, a discretionary power is also left to the banks whatever charges they may apply to a customer or a range of customers but limited to the maximum ceiling.
Meanwhile, an official of BOBL said that the ‘banks were facing large short comings,’
“In the face of competition, loan interest rates would go down. We are worried about the new proposal,” he said.
According to the proposal, charges for services like savings cheque book, pass book, and balance enquiry, were to be provided free by the banks while other services like TT/ Drafts were reduced upto some 30%.