Thanks to holiday calendars, banks make a lot of money at our expense

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The other week, I received a payment check from my bank: the bank put a check, or a temporary hold, on a payment made to me.

The payment came from Chennai, which was observing a public holiday on that day.

The next day was also a public holiday, in Chennai and elsewhere, so another check for payment. Then came the weekend, with the second Saturday of the month and the banks closing on Sunday. So I received payment by check for four days. Such holiday-induced payment delays are a common occurrence that millions of depositors not only in India but across the globe regularly face.

How do banks profit, at our expense, from such check payments? They profit because of monetary insomnia: money never sleeps.

Most people are getting their usual sleep, with Bankers perhaps getting their fair share of naps, and then some, with all the free time the holidays give them to hit the hay.

But money never sleeps, even when we do, but it’s always busy, busy, busy, earning interest wherever it is.

And in the case of check payments – also known as suspense accounts, the wait resulting from you not knowing when the money owed will be credited to your debit and credit statement – the money in question stays in your bank’s vaults, earning interest for them rather than you.

A phrase most frequently used by banks when communicating with customers is that a given payment transaction will be completed in “four working days”. The key word here is ‘work’.

There are 43 annual public holidays listed by the RBI in the Union Territory of Pondicherry, including the second and fourth Saturdays of every month and Sundays. Different states have different holidays, which means that when banks are working in one part of the country, they may be closed elsewhere.

So “four business days” may well add up to six days, or even eight, while payments are suspended, making payment by check unavoidable. So much so that you can count on them.



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The opinions expressed above are those of the author.



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