A renewal fee should describe work that happened

The question that prompted our renewal-fee review was simple: what had we done to renew the facility? We could point to an entry in the fee schedule and a change in the system date. We could not give a consistent account of the review behind that change. For some accounts, the extension had been largely automatic. I found that a more useful starting point than a debate about whether customers disliked fees. Businesses can pay for a service they understand. The harder problem arises when the organisation itself cannot identify the work that a charge is supposed to describe.

The service behind the description

I asked operations and compliance to examine the difference between a substantive renewal review and an administrative rollover. That was not an invitation to decide a legal question through a management slogan. Contract terms, disclosures and individual circumstances still required the appropriate review. My question concerned the product we intended to offer going forward. If we called something a renewal review, which decisions and activities made that description accurate? Who performed them, what evidence did they use and how could a colleague establish that they had occurred? The answers needed to exist outside the recollection of the person handling the account.

The first response was to list all the work involved in maintaining a lending relationship. There was plenty of it: payment allocation, customer queries, document updates and internal monitoring. I did not dispute its value. I asked whether it explained this particular charge. A general account of the company's costs can obscure the relationship between a fee and the service described to a customer. We needed to be clear about what was included in the ongoing product and what constituted a separate review. Otherwise the label could become an adaptable justification for income rather than a useful description of work.

That distinction also mattered for staff. Colleagues should not have to defend a charge by inventing an explanation at the moment a customer questions it. They need a record that supports the description and a route for cases that do not fit. When the operating process is vague, the burden moves to the person having the conversation. A confident answer may conceal uncertainty, while a cautious answer can make the colleague appear unhelpful. I wanted the organisation to do the explanatory work before asking individual employees to carry that responsibility. The product decision and the service record therefore had to change together.

Keep the cost visible

The revised approach removed the ₹8,000 charge from automatic rollovers. A fee could remain for a completed renewal review where the agreed terms supported it. The next annual plan had assumed six hundred automatic rollovers, so the change removed ₹48 lakh of projected income. That number was small relative to the whole business, but it was still income we had expected to earn. I asked the finance head to show the reduction explicitly. Moving it into an unexplained variance would have weakened the board's understanding of the decision and made it easier for the old practice to return through a different label.

There was understandable pressure to attach a balancing benefit. A clearer product might improve customer confidence, reduce arguments or help retention. Those were plausible possibilities. They were not measured results at the time of the decision. I did not want to replace an unclear fee with an equally unclear financial claim. We accepted the revenue reduction because the revised proposition was more defensible on the evidence we had. That is different from claiming that every reduction in a charge pays for itself. Some decisions cost money, and a board should be able to see that cost without being offered a speculative offset.

The operating cost also deserved attention. If a substantive review required more work, that work needed capacity and a clear purpose. It would be possible to remove the automatic charge while creating a cumbersome process merely to justify another one. I asked the teams to identify what the review decided and which information was necessary for that decision. A longer checklist was not automatically a better service. The review had to be useful to the lending relationship, proportionate to the case and capable of being explained. Its record needed to show the decision reached, not simply the number of activities completed.

Historic cases required a different process from the prospective product change. We did not issue a blanket statement that every previous charge was correct, nor that every previous charge should be returned. Compliance and the case owners examined the applicable terms and circumstances. Keeping those questions separate helped avoid using a new policy as an unsupported answer about the past. It also prevented an unresolved historic review from becoming a reason to continue a practice we had already decided to change. The chief executive's responsibility was to ensure that both workstreams had accountable owners and that their conclusions were not confused.

Review the result without rewriting the decision

After implementation, I wanted to know whether colleagues could explain the revised treatment consistently and whether records showed the review behind any remaining charge. Those were direct tests of what we had changed. Customer retention and broader relationship outcomes were relevant, but they could be influenced by many other factors, including credit terms, service failures and competitors' offers. We needed to avoid attributing every favourable movement to the fee decision. The same restraint applied to an unfavourable result. A customer leaving after a charge was removed would not, on its own, prove that the change had been pointless.

The board should be able to revisit a decision without quietly changing its original rationale. If we accepted a known cost to make the product more accurately described, the review should begin there. Did the description become accurate? Was the process performed as intended? What did it cost, including staff time? Only then should we examine wider consequences and decide whether the product needs further adjustment. That sequence makes a management judgement inspectable. It also reduces the temptation to claim success using whichever measure later looks most favourable, rather than the evidence that mattered when approval was sought.

I see this as a commercial discipline rather than an argument against fees. A lender has costs and needs a viable business model. It can explain that model more honestly when each element of the customer proposition has a clear basis. The ₹48 lakh reduction did not settle every question about our pricing or service. It removed one inconsistency and made the associated trade-off visible. That is the kind of decision record I would want to see as a director elsewhere: a specific problem, an explicit cost, a bounded claim about the expected result and a review that does not manufacture certainty after the event.