A ₹7,100 Crore Problem
In the financial year 2025-26, Indian banks collectively charged their customers nearly ₹7,100 crore for failing to maintain a minimum average balance (MAB) in their accounts. This staggering figure, disclosed in Parliament, highlights a persistent and
costly issue for millions of depositors across the country. While banking services come with operational costs, these penalties represent a significant revenue stream for banks, raised directly from customers who dip below a prescribed threshold. For many, especially those with irregular income streams, these charges can feel like a penalty for not having enough money, creating a frustrating cycle where the financially vulnerable pay more.
The Private vs Public Bank Divide
The collection of these fees is not uniform across the banking sector. A clear divide has emerged between private and public sector banks (PSBs). Data shows that private lenders are far more aggressive in levying these charges, accounting for almost 70% of the total penalties collected in the last fiscal year, amounting to over ₹4,900 crore. HDFC Bank and Axis Bank were reportedly the top two collectors of these fees. In stark contrast, most major public sector banks have moved to protect their customers from this burden. As many as 10 out of 12 PSBs, including the State Bank of India (SBI) since 2020 and Bank of Baroda since 2025, have completely waived minimum balance penalties on their standard savings accounts. This has made PSBs an attractive option for customers who prioritise avoiding such fees.
Understanding the Rules of the Game
While banks are free to set their own minimum balance requirements, they don't operate in a vacuum. The Reserve Bank of India (RBI) mandates that any charges for non-maintenance must be “reasonable” and proportionate to the services provided. Banks are also required to be transparent, informing customers about the minimum balance rules at the time of account opening and notifying them via SMS or email before a penalty is charged. This gives you a window to top up your account and avoid the fee. It’s also crucial to understand your account’s specific requirement—whether it’s a Monthly Average Balance (MAB) or a Quarterly Average Balance (QAB). A QAB offers more flexibility, as a low balance in one month can be offset by a higher balance in the other two.
Your Action Plan to Avoid Penalties
The good news is that these charges are entirely avoidable. The most effective solution is to switch to a zero-balance savings account. Under RBI guidelines, all banks must offer a Basic Savings Bank Deposit Account (BSBDA), which includes accounts opened under the Pradhan Mantri Jan Dhan Yojana (PMJDY). These accounts legally cannot have a minimum balance requirement and are exempt from penalties. There are reportedly over 70 crore such accounts in India, providing essential banking services without the stress of fees. Many private banks and digital-first banks also offer their own versions of zero-balance accounts, like Kotak 811 or IDFC FIRST Bank's offerings, which can be opened online with minimal fuss.
Smart Habits for a Healthy Balance
Beyond switching accounts, a few simple habits can save you money. First, actively monitor your balance. Use your bank's mobile app to set up low-balance alerts. Second, consider consolidating your funds. If you have multiple, rarely used accounts, you may be paying unnecessary fees. Closing dormant accounts and consolidating your savings into one or two primary accounts makes tracking easier. Finally, if you're consistently being charged, don't hesitate to speak with your bank. You can ask to convert your existing account to a zero-balance variant. Being an informed and proactive customer is your best defence against these hidden costs.
