Published On: Tue, Sep 18th, 2012

Students – Emperors for Banks ?

During the  recently held meeting  of  the Union Finance Minister  Sri P Chidambaram  with Chiefs  of public sector banks  to review their performance,   one of the points raised by the Finance Minister was the issues regarding denial of educational loans to eligible  students, by banks.  Finance Minister has asked Indian Banks Association ( IBA ) to issue a  detailed circular for protecting the interest of the student community.  While  the new guidelines  proposing  clauses like penalizing bankers for willful rejection of eligible educational loan application  might  create an impression that  bankers are against the student community,  the various facilities and freebies offered by banks to   students who open account with them  proves otherwise.  In fact going through the facilities provided to students  savings bank accounts ,  it appears like banks are treating the student community as High Net Worth Individuals ( HNIs)  or priority class  customers .

Considering that the long term  business prospects of the bank with the  next generation customers is closely connected  with  the  education and  career growth of students, there are banks who are providing free  assistance in sending applications to universities abroad.  Some banks are even providing   scholarships for selected Student Savings Bank ( SSB )   account holders for studies in top  Universities abroad for  various professional courses. In some cases a concession  on interest rate for education loan is also offered , in recognition of the long standing relationship.

Service charges on purchase of demand draft, fund transfer towards examination fee, application for higher studies etc are waived for such accounts by most of the banks.   For students undergoing professional courses temporary overdrafts up to certain limits are allowed, at the discretion of the bank.   Free collection of cheques , drafts and gift cheques in the name of the account holder are also offered.  For attracting students to maintain higher balance in their saving account   auto sweep facility is activated by many banks. Auto Sweep facility  helps the students to earn higher interest on the funds maintained with the bank  by transferring the amount in excess of certain specified  limit to fixed deposits . Thus against a 4 per cent interest eligible  on SB accounts the students can enjoy interest of 8 to 9 per cent on the fixed deposits, if higher balances are maintained.

 

Considering that the younger generation is very tech savy most   banks are offering  internet banking and  mobile banking facility free  for their students savings accounts. These facilities enables the students to enquire about  balance in the account, download  detailed statement of accounts , transfer funds , pay utility bills, hostel bills, tuition fees etc. without the constrains of place and time.  Banks generally prefer to issue only debit cards to students  and cheque books are issued only if the age of the student is more than 18 years.  Students don’t have to bother about fetching their bank ATMs as many banks offer other bank ATM transactions free,  up to certain number of transactions per month.   Apart from the free  “click” banking services,   in many cases  transfer of  funds from the parent’s account to the child’s account is   also offered free of charge, so that the child’s  college fees, tuition, living expenses etc. are taken care of.  A parent can also give a standing instruction to the bank for crediting a specified amount to the child account for meeting the various  expenses.

 

The  most attractive feature of the Students Savings Bank ( SSB ) account is that  the accounts can be opened with zero balance at most of the banks. Some banks insist on  an average balance to be maintained in the accounts , but  there are also banks who don’t insist on such minimum balances. When compared to the formalities for opening a  normal Savings Bank  ( SB ) account , opening a students savings bank   account is very easy.  In many cases documents and introduction from the educational institution itself is accepted as sufficient for satisfying the Know Your Customer ( KYC ) norms. A copy of the student ID card issued by the educational institution  is mandatory for opening a students support savings account with almost all banks.   The entry age varies from banks to bank.  Even though   some banks restrict students  savings account to students of professional colleges only,  majority of the banks provide this facility even for school going children.

 

A savings account opened in the name of the child at the young age helps in inculcating a habit of savings and thrift in the minds of the children.  It also adds to the self confidence of the child   and  to some extend helps  in learning to manage their finance on their own.  First hand experience and exposure to the financial world would definitely be a good learning experience for kids. If “Customer is the King” , with the facilities as mentioned above being offered  by banks to students, I think for banks “Students are the Emperors” .

 

Jiz P Kottukappally is a  working as Asst General Manager , Catholic Syrian Bank and the views expressed are the personal opinion of the author. Author can be reached at jizpauls@gmail.com

Jiz


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Students – Emperors for Banks ?