If domestic banks are to withstand competition from incoming foreign rivals, they must step up their own efforts to better serve domestic clients.

Unfortunately, a recent dispute between a customer and the Industrial and Commercial Bank of China (ICBC), shows that domestic banks are yet to press ahead with self-motivated reforms.

An individual depositor in Beijing recently sued a local branch of the ICBC, the country's largest bank which had just finished the world's largest IPO on the Hong Kong and Shanghai stock markets, accusing the bank of short-changing him on his interest.

The bank explained that the difference between the amount of interest it paid and the amount the customer expected was caused by differences in their method of calculating the interest period.

The depositor thought that the interest should be calculated according to the actual number of days he had his money in the bank.

But the bank argued that during those months when there are 31 days, the interest should be calculated as for a month of 30 days. And the bank insisted that this was standard practice in line with a rule issued more than 40 years ago by the People's Bank of China, the central bank.

There was indeed such a rule that the central bank made for the convenience of interest calculation. But the central bank also issued a new rule in 2005 to allow domestic banks to choose their own rules for interest calculation.

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