A Well thought (but misguided) Strategy or a Scam - Program Management fee for HDFC Classic and Preferred accounts

An open letter to HDFC Bank Executives
by a long time loyal customer (now looking for moving to other banks)

Since Jan 2016, HDFC bank started charging Rs 100 per quarter as program management fee for classic and preferred accounts.

I have been a long time hdfc customer with decent amount of money parked in FDs and multiple savings accounts. I came to know about this 'program management fee' after seeing Rs 100 + service fee deducted from my bank accounts every quarter. I don't have any use of so called preferred services. Since then I have been struggling to convert my HDFC accounts from preferred to regular by asking my relationship manager multiple times without much success and it occured to me that it's probably a well-oiled scam in the tune of crores of rupees.

How it goes:

  1. Automatic conversion of savings account to classic or preferred accounts over the years (without customers request or even without informing them) -- if the account balance or fixed deposits are beyond a certain amount
  2. Automatic initiation of charging 'program management fee' of Rs 100 per quarter since jan 2016 without taking any approval from customer (or giving them an option to downgrade to regular savings account)
  3. Dilly-dalling on requests by customer (who calls after seeing program management fee in account statement) to convert from Preferred to Regular

Point 3 and Point 2 are straight evil. It would have been fine if the customer himself had made a request to avail preferred or classic services, but not when accounts were automatically converted to preferred/classic by the bank.

I am not sure if this will even pass the legal test.

Assuming a complete guesswork of say 1 lakh such accounts, we are looking at 1L * 400 per year = 4 crore collected by bank in illegal way.

Misguided strategy

What baffles me most is that the people most affected by this strategy are the bank's most important customers - i.e., customers who have parked lot of money in the bank. Banks already make lot of money from such customers by lending their money to borrowers at much higher interest rates. Then what's the need of putting something like program management fee? And even if the bank introduces such scheme, it should have ideally converted 'auto-converted' customers back to regular or given them a simple choice to select.

Many of us auto-convered customers don't use any of the preferred banking services. Now we need to go through lot of hassle just because our accounts were auto-converted to preferred/classic for parking lot of money/fixed deposit in the bank.

I guess it's time to move to other banks. Though it leaves a bad taste in mouth. And who knows if other private banks are already insipred by this and planning their own variant of this...

Category: finance