Banks collect ₹7,100cr in MAB penalties

• Indian banks collected ₹7,100 crore in MAB penalties in FY 2025-26
• Private banks took 70% of fees, led by HDFC and Axis Bank
• Customers can avoid charges by using zero-balance BSBDA accounts

That small charge you barely noticed might be part of a much bigger picture. Last year, Indian banks collected a staggering amount from customers for not maintaining a minimum balance, sparking fresh debates about banking fairness.

The Scale of the Penalties

In the financial year 2025-26, banks in India collected nearly ₹7,100 crore in penalties from account holders who failed to maintain the required Minimum Average Balance (MAB). This figure represents an increase from the approximately ₹6,800 crore collected in the previous financial year, according to data presented in Parliament. The data highlights a significant and growing source of non-interest income for banks, drawn directly from the savings of ordinary customers. Over the last four years, the total collection from these penalties has amounted to a massive ₹26,190 crore.

Public vs. Private Banks: A Tale of Two Systems

A closer look at the numbers reveals a stark difference between public and private sector banks. Private banks were responsible for nearly 70% of the penalties in FY 2025-26, collecting around ₹4,949 crore. HDFC Bank led the pack, levying penalties worth approximately ₹1,800 crore, followed by Axis Bank with over ₹1,081 crore. In contrast, all 12 public sector banks (PSBs) collectively gathered about ₹2,138 crore. This disparity reflects differing business models, with many PSBs having either waived or reduced such charges on basic savings accounts to promote financial inclusion. In fact, 10 out of 12 PSBs have discontinued these penal charges for savings accounts.

Understanding Minimum Balance Rules

So, what exactly is a Minimum Average Balance? It's the average amount of money a bank requires you to keep in your account over a specific period, usually a month or a quarter. To calculate this, the bank adds up the closing balance of your account for each day of the month and then divides it by the number of days in that month. If this average falls below the set threshold, a penalty is charged. These thresholds often vary based on the bank, the type of account, and the branch location (metro, urban, or rural). Banks argue that these fees help cover the costs of maintaining accounts and providing services.

How to Avoid Minimum Balance Charges

While these penalties are widespread, they are entirely avoidable with a bit of financial awareness. The simplest solution is to opt for a zero-balance account. The Reserve Bank of India mandates all banks to offer Basic Savings Bank Deposit Accounts (BSBDA), which require no minimum balance. These accounts, including those opened under the Pradhan Mantri Jan Dhan Yojana (PMJDY), provide essential banking services without the risk of penalties, though they may have limits on the number of free transactions per month. For those with regular savings accounts, it's crucial to know your bank's specific MAB requirement. Setting up alerts via SMS or your banking app can notify you if your balance is running low. If you consistently struggle to meet the requirement, speak to your bank about converting your account to a BSBDA or another zero-balance option.