New Delhi, Jul 9: Banks could lose hundreds of crores of rupees in annual fee income after the Reserve Bank of India (RBI) barred them from charging customers for SMS alerts sent for compliance, awareness and promotional purposes, according to a report by The Economic Times.

In directions issued on June 24, the RBI prohibited banks from levying charges for such SMS alerts. Until now, most banks charged customers about Rs 15 to Rs 18 per quarter to recover the cost of sending these messages.

According to the report, the move could reduce banks' annual fee income by around Rs 300 crore. A large bank with 50 million customers paying the fee could lose nearly Rs 360 crore a year.

Banks May Recover Costs Elsewhere
With standalone SMS alert charges no longer permitted, banks are expected to recover the expense through other means.

According to the report, lenders may factor the cost into account maintenance charges, minimum balance requirements or other service fees.

Low-Value Transaction Alerts Now Optional
The RBI has also removed the mandatory requirement for banks to send SMS alerts for transactions of Rs 500 or less, making such alerts optional.

The move is expected to reduce the volume of messages sent by banks, given the large number of low-value digital transactions processed every day.

However, major private-sector lenders such as HDFC Bank and ICICI Bank are unlikely to discontinue these alerts. According to the report, both banks consider transaction notifications an important part of customer service and fraud prevention.

The report said the savings from sending fewer SMS alerts for low-value transactions could partly offset the loss of fee income resulting from the RBI's new rules.

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Telecom Operators May Face Larger Impact
The changes are expected to affect telecom companies even more significantly.

According to the report, making alerts for transactions below Rs 500 optional could reduce India's commercial SMS traffic by nearly 20%. The country currently generates an estimated 60 billion to 80 billion commercial SMS messages each month.

The RBI has also allowed banks to use alternative channels, including push notifications, in-app alerts, Google Rich Communication Services (RCS) and WhatsApp, for transaction alerts below Rs 500.

The shift is expected to increase competition in a segment that has traditionally been dominated by telecom operators through SMS services.