How Much 11 PSBs Collected as Penalty for Low Bank Balances In FY21-FY25?

Between FY21 and FY25, eleven public sector banks (PSBs) in India collected nearly ₹9,000 crore as penalty charges from customers who failed to maintain the minimum balance in their savings accounts. The data was shared by the Finance Ministry in the Rajya Sabha, in response to a question by Congress President Mallikarjun Kharge. The move has reignited debate over the fairness of such penalties, especially given their impact on customers in semi-urban and rural areas.

Discontinuation of Minimum Balance Penalties

Key Banks that Ended Charges

• The State Bank of India (SBI) had already discontinued average monthly minimum balance charges in March 2020.
• Later, Canara Bank, Bank of Baroda, Punjab National Bank, Indian Bank, Bank of India, Central Bank of India, and Union Bank of India followed suit from the second quarter of FY26.
• However, private sector banks, which levy higher charges than PSBs, are yet to waive such penalties.

Logic Behind the Penalty

Basis of Charges

Some banks charged customers for failing to maintain a monthly minimum balance, while others imposed penalties on a quarterly basis.

Certain categories of accounts were exempted from maintaining a minimum balance, including,

1. PM Jan Dhan Accounts
2. Basic Saving Bank Deposit Accounts (BSBDA)
3. Salary Accounts
4. Other special categories

Government’s Stand and Advisory

Finance Ministry’s Statement

In his reply, Minister of State for Finance Pankaj Chaudhary said that the Department of Financial Services (DFS) had advised banks to rationalise penal charges, with particular emphasis on providing relief to customers in semi-urban and rural areas. Seven out of 11 PSBs have implemented this advisory. The remaining four PSBs are expected to follow soon.

RBI Guidelines

The Reserve Bank of India (RBI) has framed rules regarding the levy of such charges. Banks may fix penal charges as per their Board-approved policies. The charges must be a fixed percentage calculated on the difference between the actual balance and the required minimum balance, as agreed at the time of account opening. RBI also stressed the importance of ensuring fair customer service while imposing such penalties.

Impact on Customers

The imposition of penalties has been controversial,

• For urban customers, maintaining minimum balance is often manageable.
• However, for customers in semi-urban and rural areas, the fines added an additional financial burden.
• The advisory from the DFS and RBI guidelines aim to protect vulnerable customers while ensuring banks recover service costs fairly.