The Reserve Bank of India (RBI) issued directions on June 24 barring banks from levying any charges on customers for SMS alerts sent for these specific purposes. Most banks hitherto recovered these costs on SMS alerts by charging customers Rs 15-18 per quarter as fees.
Banks have also been given the flexibility of dropping mandatory alerts for lowvalue 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.
A large bank with 50 million fee-paying customers, for instance, could forgo approximately Rs 360 crore in annual fee income if it can no longer pass on the cost of these regulatory communications.
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“The key challenge for banks is, therefore, 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,” said abanker. With direct recovery barred, banks are likely to absorb this cost through indirect routes instead. Some may crosssubsidize by folding the expense into other fee structures — account maintenance charges, minimum balance requirements, or other transaction fees — rather than a standalone ‘SMS charge’.
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Meanwhile, the RBI has also relaxed the rule requiring banks to send SMS alerts for transactions of Rs 500 or below – making it optional rather than mandatory – thereby significantly reducing the messaging burden arising from India’s high volume of micro-transactions.
However, large private sector banks are expected to continue sending these alerts anyway, given how heavily they rely on the practice for customer service and fraud detection, senior executives said. The net impact of the new rules on banks is mixed, with costs falling in some areas and rising in others.
For telecom operators, the relaxation on micro-transactions could wipe out nearly 20% of the overall commercial SMS traffic which is estimated to be 60-80 billion messages a month. 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 Rs 500. This introduces competition for telecom SMS services, which until now enjoyed regulatory protection.
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India processes billions of retail transactions every month, with an estimated 60-70% falling below the Rs 500 threshold. Banks typically pay 8-20 paise per message to telecom aggregators. 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.
“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,” said Aniketh Jain, cofounder of enterprise messaging startup Fyno.
“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,” he added.
Even so, large lenders 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.
SMS also 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, or email as lower-cost alternatives. WhatsApp or Google RCS are also comparable cost alternatives.