The Reserve Bank of India's directive issued on June 24 barring banks from charging customers for SMS alerts sent for compliance, awareness, or promotional purposes could result in a loss of fee income of up to ₹300 crore for large lenders, according to banking officials. Most banks had previously recovered these costs by charging customers ₹15-18 per quarter as fees for such alerts. A large bank with 50 million fee-paying customers could forgo approximately ₹360 crore in annual fee income if it can no longer pass on the cost of these regulatory communications. As reported by The Economic Times, the key challenge for banks is less about technology implementation and more about absorbing the ongoing cost of customer communications, while deciding whether continuing SMS alerts for low-value transactions remains commercially worthwhile and consistent with their customer experience strategy.
With direct recovery barred, banks are likely to absorb this cost through indirect routes instead, as reported by The Economic Times. Some may cross-subsidize by folding the expense into other fee structures — account maintenance charges, minimum balance requirements, or other transaction fees — rather than maintaining a standalone 'SMS charge'. The RBI has also relaxed the rule requiring banks to send SMS alerts for transactions of ₹500 or below, making it optional rather than mandatory, thereby significantly reducing the messaging burden from India's high volume of micro-transactions. However, top-draw private banks such as HDFC Bank or ICICI Bank are unlikely to reduce SMS alerts for such transactions to ensure their reputation for technology adoption and customer experience isn't compromised.
The relaxation on micro-transactions could wipe out nearly 20% of the overall commercial SMS traffic for telecom operators, which is estimated to be 60-80 billion messages a month, according to The Economic Times. India processes billions of retail transactions every month, with an estimated 60-70% falling below the ₹500 threshold. Banks typically pay 8-20 paise per message to telecom aggregators, and if banks discontinue SMS alerts for these transactions, the resulting savings on telecom messaging bills could run into tens of crores annually for these lenders. The RBI has also recognised alternate channels such as push notifications, in-app alerts, Google RCS and WhatsApp as valid channels for transaction alerts below ₹500, introducing competition for telecom SMS services which until now enjoyed regulatory protection.
The RBI has recognised alternate channels such as push notifications, in-app alerts, Google RCS and WhatsApp as valid channels for transaction alerts below ₹500, introducing competition for telecom SMS services, as reported by The Economic Times. Aniketh Jain, cofounder of enterprise messaging startup Fyno, noted that "transaction alerts are the most-opened messages banks send. By moving sub-₹500 transaction alerts to push notifications, what was once a compliance cost can become a customer engagement channel that banks fully own." He added that "banks that view this circular merely as a cost-saving measure will do the minimum. Those that see it as a blueprint for digital engagement will emerge by January 2027 with lower costs, stronger customer relationships and cleaner audit trails."
Large private sector banks such as HDFC Bank, ICICI Bank, Axis Bank, and Kotak Mahindra Bank — all of which have invested heavily in customer experience — are expected to continue sending these alerts, since their customers have come to expect instant SMS notifications, according to The Economic Times. SMS remains one of the most reliable fraud-detection mechanisms available to banks, and discontinuing alerts could lead to a rise in customer disputes. These lenders may instead lean more heavily on mobile app push notifications, email, or WhatsApp as lower-cost alternatives, with WhatsApp or Google RCS also being comparable cost alternatives.
