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Thursday, November 28, 2013

The Curious Case of Saraswat Bank

I have banked with Saraswat Bank for over 6 years now. The banking relationship started with me applying for a Home Loan, and was then extended to other products such as Personal Loans and overdrafts. I have visited multiple branches across 4 cities and interacted in my capacity as a customer with officials across businesses and technology and have a fair idea of the customer experience offered by Saraswat Bank. Initially, I was amazed at the very competitive interest rates they offered [10% for Home Loan and 12% for Personal Loan], but it was only later reality dawned and I was shocked at how this bank operates with little respect of customer trust, information security and borders on violating RBI guidelines. Before I elaborate further, I should highlight that I still bank with them [albeit with much caution] because there is an emotional bond being a Saraswat and the branch managers and the staff have always been helpful and welcoming and have tried to help me to the best of their capabilities and have frankly admitted to the process related faults as well, however I think it is important to highlight certain facts and concerns, so that all existing customers and prospective customers are aware of the pitfalls of banking with them. These are my personal experiences and I have tabled these formally and informally at several levels in the bank, however there has been little improvement and hence this article. I also acknowledge that other cooperative and private banks may also operate in a similar fashion, but customers should have zero tolerance to poor service from any banks irrespective of it being a private, MNC or PSU bank.  

I would like to state at the outset that most of the customers of Saraswat Bank is 50+ years. I have rarely seen any younger customers at the branch which I used to visit and still visit when I am in Mumbai [Bandra East] and most people seemed to be in the 50+ age group with limited knowledge of emerging technologies and would trust the branch manager profusely, attend Pooja's in the bank branches and treat the branch staff as their extended family. This background is important as this is a set of customers who are very trusting and will pretty much believe what you say as a branch manager without batting an eyelid. I have narrated 5 instances which point to a complete lack of processes at the bank which should have customers very worried - so I hope you get a fair idea of the potential risks of banking with them. 

[1] Misleading (bordering on duping and cheating) Customers on the Savings Bank Interest Rate 
The Reserve Bank of India deregulated the Saving Bank Interest Rate and promptly Saraswat Bank increased the Savings Bank Interest Rate to 6% p.a. (up from the earlier 4%) There were huge banners on Western Express Highway in Mumbai and several other prominent locations marketing the Interest Rate increase to 6%. I have seen the Branch Manager convince an elderly couple [who I am sure treated her as their daughter] to move balances from another Bank to Saraswat Bank highlighting the 6% rate while the other bank was offering only 4%. For 3 months that the rate was 6% all the branch managers and sales staff went into overdrive and mopped up deposits from their unsuspecting family of customers. I am guessing a record number of accounts were opened and significant balances were moved into Saraswat Bank by unsuspecting customers.  

Promptly after a few months, to my utter shock,  the rate was dropped to 4% once again without informing these very customers who had moved balances. RBI guidelines state that whenever there is change in the Fees and Charges, the customers need to be informed at least 30 days in advance and the onus is on the bank to make the best possible effort to communicate the fee change to customers across multiple channels. I have worked for Citibank and Indusind Bank and am a customer of ICICI and HDFC as well and I receive messages in my statement and letters at my mailing address informing me of the change in rates. The compliance processes in these banks are very strong and they ensure that the customer is communicated via SMS, e-mail, statement, physical mail etc. Some of them even display it on their ATM Screens.

However all Saraswat Bank did was put a ticker on www.saraswatbank.com page which stated that the interest rate was revised back to 4% from the previous 6%. This would have been done 30 days prior to the change - but I am confident that less than 1% of the impacted customers would have noticed it and most of it would still not be knowing that they are not getting the interest rate that they thought they were getting. While what Saraswat Bank did is not in the spirit of the RBI guideline I urge customers to be very aware of such matters and raise a voice against the bank. I was not impacted by this, but I know several customers were and they were very upset with this. But being senior citizens - did not have the energy or inclination to follow up on it, and this is precisely what Saraswat Bank takes advantage of.   
[2] Sham of an Elite Gold Banking Account 
Saraswat Bank launched an Elite Gold banking Account a while back with a minimum balance of INR 100,000 and with a host of moth watering features. It is to be noted that Private banks and MNC banks which offer awesome services across channels have a lower minimum balance so I thought that the feature set offered on this account would definitely blow me away. The branch manager also gave me a call inviting me to a discussion on this product (given that I was one of the few younger customers of the branch who would be excited by an "eStatement", "Birthday SMS" and " Premium Debit Card" which were called out as salient features. She presented me with a feature set of 20+ points and made a full on sales pitch of why it was the perfect product for me and my wife. Other than a Birthday SMS and a Birthday Call from the Branch Manager which were a first for me in my 7 year banking career, the other features included a premium debit card, waiver on some car loan processing fees, door step banking services such as cheque pick up, e-statement delivery etc. After seeing the last feature which was "Birthday SMS" and "Birthday Call from Branch Manager" I thought that I should experience this product and to be frank I was in need of e-statements and cheque pickup and drop facility and I was anyways banking with them so it made sense to upgrade my account (or so I thought). I promptly cut 2 cheques of INR 100,000 each and handed it over to the branch manager who was almost jumping in glee seeing a fresh convert. My accounts were opened and I called the branch for my premium debit card only to be informed that  most of the product features were not yet launched. 15 out of the 20 features would be launched in the coming year and Saraswat Bank was incorrectly trying to mop up deposits. This again is very incorrect and violates the RBI guidelines at some level. But given that very few Saraswat Bank customers were interested - I though the impact of this would be limited and did not care too much beyond a point. I landed up cancelling the account within 2 days of opening it. However, they may try to pull this stunt in the future (or any other bank may try) so please beware. 

[3] Data Security huh? What is that?  
If you call any of the Saraswat Bank Branches and give an account number they promptly start rattling of the balance information and sensitive details of the customer such as Name, Address, PAN etc. I have experienced this multiple times when all I give is the account number and I am able to extract all information. The calls are not taken on recorded lines, there is no validation of the customer which is done, funds transfer requests are taken over phone. The Internet Banking Helpline does all kinds of account linkages etc. over phone without ay audit trail of the request coming in from the customer. the list is endless. Please go ahead and try for yourself. This trend is across branches. As I have family members across all branches, I have seen this across over 5 branches. This would be a fraudsters paradise. All you need is a customers account number or name and all the other details will bve provided by the every helpful staff of Saraswat Bank. be scared! Be very very scared! Given the kind of banking fraud that is carried out from foreign shores - Saraswat Bank is a sitting duck for fraud. 

[4] Why does Internet Banking need to be secure? 
When I initially opened the account [2008], I had requested for Internet Banking Passwords. Despite repeated requests they were never mailed to my address. I had already placed 3 written requests at the branch but nothing happened. So I went into the branch managers cabin on a Saturday morning and expressed frustration at the turn of events. To my surprise, the Branch Manager called up the Vashi office of Saraswat Infotech Limited where the technology team sits and instructed them to generate a fresh PIN. Within 15 minutes the Internet PIN was printed / generated and communicated over telephone by the technology guys to the Branch Manager and by the Branch Manager to me. The Branch Manager expected me to be thankful that my Internet Banking PIN was instantly generated, without realising that both he and the technology guy knew what it was and could go ahead and empty my account upto the transaction limit of Rs.50,000. He simple did not get the importance of the PIN security. When I asked him in shock he dismissed it saying that I could go home and change it and told me to leave his cabin dissapointed that I did not compliment him for the heroic act. Also if you call the Internet Banking Helpline in Saraswat Info-tech Ltd., they entertain all kind of requests on phone as long as you speak in Marathi. You can pretty much link customer IDs, get Internet Banking Passwords on phone etc. etc.  
[5] Operational Procedures which make you want to faint!   
When a Joint Account is opened by 2 people, it can configured to be operated in "JOINT" mode or in "EITHER OR SURVIVOR" mode. My wife and I opened an account in EITHER OR SURVIVOR mode which means that either one of us can operate the account. When a cheque is signed either one of us can sign the cheque. However recently I needed to reissue the Internet Banking passwords for myself, so I went to the branch to write an application, the submission of which was promptly refused. It was not refused due to a signature mismatch or any other valid reason, but because they wanted me to have the password reissue request signed by my wife as well. For moving funds out of the bank account via cheque I need only 1 signature, but for an Internet banking password reissue Saraswat Bank has mandated joint signatures, which I am sure is a FIRST in the banking industry in India. When questioned, the branch manager and staff is not able to offer any valid explanation and point to some circular which has come from the central office. All of us in India follow some stupid process - especially at airport security where we are forced to go through multiple redundant checks, but those familiar with banking will agree with me that this takes the cake. 

So I encourage all customers to consider all the above points before choosing to bank with Saraswat Bank and if you are already banking with them - do read the above and evaluate if you want to continue. I would like to reiterate that the staff is very sweet and very helpful, they have teated me like their son for the last 7 years and these are people I really like and whom I meet on the road, bump into them at the super market and some of whom I have known for years. The problem is more systemic, so I am hoping that several customers will reference this blog and go to the management and ask for process changes to be implemented so that customer impact is minimized. Being a proponent of financial literacy and awareness - I thought the correct thing to do was write about it and leave it at that. 

Monday, January 11, 2010

Banking Tip: Foreign Exchange for Travel Abroad

Whenever you travel abroad, you are bound to require Foreign Exchange for all your spends abroad. There are several merchants / banks waiting to fleece you when you go to them for your Foreign Exchange Transactions. Do note that forex revenue is a major source of revenue for banks and it is just a question of who makes the least money of you as compared to which is the best the deal for you.

When you travel abroad, you will have 3 options for foreign exchange which are listed below. I have clearly listed out the merits and demerits of each option and clearly stated the option which is best (or least worst) for the customers. Please go through this article and pass on the messages to all your friends who frequently travel abroad.

Option 1: Go to a Money Exchanger on the Airport (Worst for Customer)
This is by far the worst option. I was travelling from Mumbai to Hong Kong recently and the Bank Rate for HKD is as follows 1HKD = 6.1 INR. The rate quoted at the airport was 1HKD = 7.8 INR. Please note that this is more than a 20% mark up and is completely unheard off and these guys are completely fleecing you. To make things worse handling charges of Rs.150 are additional to this. The rate offered at airports abroad and at any money exchangers are slightly better (Mumbai airport is by far the worst I have seen) so you may think of using those. However whenever you travel abroad please be aware of the rack rate. In today’s information age you cannot let other people make money off your ignorance.

Option 2: Use your Credit Card Abroad
Using a Credit Card at a Money Exchanger is no different from using the money exchanger themselves; you are acting even more stupid and paying the Credit Card foreign exchange fee in addition to the 20% or so margin. You could not be more stupid.

However you are better off if you directly spend abroad on your Credit Card. The Exchange Rate that gets applied to your transaction is the approved VISA / Master Card exchange rate which is about 1% over the rack rate. In addition to this your Credit Card Company levies a Foreign Exchange Fee ranging between 1% and 5%. While I am aware of SBI Card offering their Platinum Card with a Forex Fee waiver, and Barclaycard charging 3.5%, I have not heard of any credit card issuer charging in excess of 3.5%.

In such a case if you spent HKD 100 the exchange rate applied would be Rs.6.3 (instead of the Rs.7.8 applied by Money exchangers but higher than the Rs.6.1 rack rate). Hence the Transaction amount would be Rs.6300 and I would pay an additional 3% which would be the Foreign Exchange Fee which would be approximately Rs.200 with Service Tax. Hence the effective Exchange Rate will be Rs.6.5. This is a good option and users should start using this option as compared to money exchangers.

Option 3: ATM Withdrawals from Indian Bank Account (Best for Customer)
This is the best option to get foreign exchange. I am sure all of you have Bank Accounts and Debit Cards with Banks in India. I have with Citibank and ICICI Bank and have validated this with both the Banks. The Debit Cards issued by these Banks are International Debit Cards and have a VISA / VISA Electron / Master Card / Maestro Logo displayed on them. These can be used at any ATMs abroad which have these Logos. When you withdraw money through the ATMs, the rate which gets applied is the rack rate and you get a flat fee for International ATM Withdrawal Transaction which is approximately Rs.150 + service Tax. This means that you land up paying a flat fee of Rs.150 and Service Tax for the Foreign exchange transaction. For low transaction amounts of Rs.5000 and below Option 2 makes sense, however for any transaction which is more than Rs.5000 this option makes the most sense.

I have illustrated the same through examples. If I want 1000 HKD to be converted for Travel to Hong Kong, the bank rate being 1HKD = Rs. 6.1

Option 1: I need to pay the Money Exchange Rs.7800 + Handling Charge of Rs.150 = Rs.7950. The effective Exchange Rate becomes Rs.7.95
Option 2: If you use your Credit Card for 1000 HKD, you have a Credit Card transaction at a premium rate of Rs.6.3 which gives a transaction amount of Rs.6300 and in addition to this a Credit Card Fee of 3% which is approx Rs.200 with Service Tax. The effective Exchange Rate becomes Rs.6.5
Option 3: If you Use your Bank Account, you pay Rs.6100 + Rs.150 + Service Tax and the effective Exchange Rate is Rs. 6.3 which is by far the best option.

I sincerely urge all readers to send this articles to all friends and family who travel abroad frequently as we cannot have all these merchants making money of our ignorance. If you feel this article makes sense the next time you save money by following the tips stated above, please donate a part of the sum saved to charity.

For any queries or feedback do write back to Ask.Pranav@Gmail.Com and I will try to write back to you as soon as possible.