RBI Bars SMS Alert Charges, Banks May Lose ₹300 Cr in Fees

Banks in India stand to lose up to ₹300 crore in fee income after the RBI barred them from charging customers for SMS alerts sent for compliance, awareness or promotional purposes, according to a report by the Economic Times.

On June 24, the RBI issued directions prohibiting banks from levying any charges on customers for SMS alerts sent for these specific purposes. Prior to this, banks typically charged customers ₹15-18 per quarter to cover the cost of such alerts.

A large bank with 50 million fee-paying customers could lose close to ₹360 crore in annual fee income once it is no longer able to pass on these costs to customers.

Since direct recovery through a standalone SMS charge is no longer allowed, banks are expected to recover the cost in other ways. Lenders may build these expenses into account maintenance charges, minimum balance requirements or other transaction fees instead, according to the report

Separately, the RBI has done away with the mandatory requirement for banks to send SMS alerts on transactions of ₹500 or below, making such alerts optional. Given the sheer volume of micro-transactions in the country, the move is expected to ease the messaging load on banks considerably.

Even though banks now have the option to stop sending alerts for these low-value transactions, large private lenders such as HDFC Bank and ICICI Bank are unlikely to do so. These banks have built their reputation around strong technology adoption and customer experience, and continuing the alerts helps them maintain both, besides supporting fraud detection.

The combined effect of these two changes on banks is mixed, since lenders stand to save on messaging costs for small transactions while losing fee income on the other category of alerts, the report added.

Telecom Firms Face a Bigger Hit

The relaxation on alerts for transactions below ₹500 is expected to affect telecom operators more sharply. The report noted that this change alone could eliminate close to 20% of India's total commercial SMS traffic, currently estimated at 60-80 billion messages a month.

Adding to the pressure on telecom SMS revenue, the RBI has now allowed banks to use alternative channels, including push notifications, in-app alerts, Google RCS and WhatsApp, to send transaction alerts for amounts under ₹500. This opens up competition for a segment that telecom SMS services had so far dominated with regulatory backing.