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 firstname.lastname@example.org