Public sector banks and major private banks collected over ₹35,000 cr in charges

As per a Finance Ministry report, both state-owned banks and leading private banks have garnered more than ₹21,000 crore in fees primarily from account holders failing to maintain the minimum balance.

Charges amounting to over ₹35,000 crore have been amassed since 2018 due to reasons such as non-compliance with minimum balance requirements, additional ATM transactions, and SMS services.

Breakdown of Charges

The report highlighted that a significant portion of the collected charges, totaling over ₹21,000 crore, resulted from customers failing to maintain the minimum balance required in their accounts.
Furthermore, a substantial sum of ₹8,000 crore was accrued from transactions conducted through ATMs beyond the stipulated number of free transactions.
Another noteworthy contributor to the collected charges is SMS services, generating over ₹6,000 crore. Banks charge customers for sending SMS alerts, and the Reserve Bank of India (RBI) has advised banks to ensure that such charges are reasonable and based on actual usage.

Monthly Average Balance and ATM Transaction Charges

This monthly average balance (MAB) or average monthly balance (AMB) varies across different locations, ranging from ₹3,000 to ₹10,000 in metros, ₹2,000 to ₹5,000 in urban areas, and ₹500 to ₹1,000 in rural regions. Failure to meet this balance criterion leads to penalties, which can range from ₹400 to ₹500, depending on the bank.

The charges for each subsequent ATM transaction are capped at ₹21 per transaction, as of January 1, 2022. This policy aims to encourage prudent ATM usage while minimizing undue financial strain on customers. Customers are typically entitled to five free transactions per month at their own bank ATMs, along with a fixed number of free transactions from other bank ATMs.

RBI’s Role and Regulations

The RBI plays a pivotal role in overseeing and regulating these banking charges. RBI circular permits banks to establish penal charges for non-maintenance of minimum balance in savings accounts, as long as these charges align with the banks’ board-approved policies.

The RBI emphasizes that these charges should be reasonable and in line with the average cost of providing services. Moreover, the central bank has urged financial institutions to ensure fairness and equity in the fees associated with sending SMS alerts to customers.