Tuesday, 10 February 2015

Are there any advantages in becoming a priority banking customer?

Being a “priority banking customer” as the title suggests is being eligible for premium or special services from your bank.  While the idea of being eligible for premium banking services is no doubt appealing, it can at time come with associated charges. So, it is good to understand the general scope of priority banking services that are offered by almost all leading banks in India.  
“Priority Banking Services” are premium services offered by banks to their customers who match their eligibility criteria in terms of level of transactions on their banking accounts, banking accounts balance, and/or number of years of association with the bank. Banks offer several additional services to retain and maintain relationship with their old high net worth customers, who can potentially offer incremental profitable business to the bank.  

Some (indicative list) of the common services/facilities provided to priority banking customers are:
1.  Premium credit cards or debt cards free of cost
2.  Zero charges on RTGS and NEFT transactions via online banking.
3.  Cheque pick-up facility.
4.  Zero charges on balance enquiries.
5.  No charges on cash withdrawals when you transact on other bank ATM in India.
6.  Completely free Cheque book payable at any bank branch in India.
7.  Concessions in locker rent
8.  Free Demand Drafts
9.  Access to exclusive lounges and other areas
10. Exclusive Relationship manager
So as you would understand, many of the above benefits are small convenience based facilities and do not offer any significant benefit to the banking customer.
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Obviously, where banks offer priority banking services free of cost, there is no harm in accepting the offer However, in several cases, a bank expects the customer to maintain high minimum amount balance in his account or pay additional annual fees to avail priority banking services.
Further, while there might not be any annual fees, one needs to be careful as what services are offered free of cost of under priority banking services as the banks may still be charging customers for some services.
One also needs to understand, that with the advent of ATMs, online and mobile banking, a rapidly growing section of regular banking customers have limited requirement for facilities such as Cheque pickups, demand drafts or a need to make branch visits quite often. Anyhow, for a large majority of customers, banking needs are basic and limited to depositing and withdrawing money with occasional requirement of a demand draft.
Hence, for these customers, becoming a priority banking customer by paying annual charges or keeping higher account balances may not make any financial sense. Priority banking services may appeal for banking customers who are not technological savvy and have a high dependence on banking to meet their business requirements such as bulk Cheque or cash deposits, cash management services and frequent requirement to make demand drafts.
It is for these customers, the additional services/features that come with priority banking may hold potential value. If you are one of the high usage banking customers, you can surely look at priority banking services to avail the extra comfort that come along. However, do remember to assess your banking requirements and do a cost benefit analysis of availing priority banking services.