The Numbers Behind the Penalties
In the fiscal year 2026, Indian banks collectively charged customers over ₹7,086 crore for failing to maintain a Minimum Average Balance (MAB) in their accounts. Provisional data tabled in Parliament revealed a stark divide: private sector banks accounted
for ₹4,948.71 crore, or nearly 70% of the total sum. This figure is more than double the ₹2,137.92 crore collected by all 12 public sector banks (PSBs) combined. The trend shows private banks are becoming more reliant on these fees, with their collections rising by 17% in FY26. HDFC Bank led the pack, collecting nearly ₹1,800 crore, followed by Axis Bank with over ₹1,081 crore. Together, these two banks alone accounted for about 58% of all penalties levied by private lenders.
What Exactly is a Minimum Balance Penalty?
A Minimum Average Balance is the minimum average amount of money a bank requires you to keep in your savings or current account over a specific period, usually a month or a quarter. If your account's average balance dips below this pre-set threshold, the bank levies a penalty. These thresholds often vary based on the account type and branch location (metro, urban, semi-urban, or rural). While the Reserve Bank of India (RBI) allows banks to set their own policies on these charges, it mandates that the fees must be reasonable and transparent. Banks are also required to notify customers via SMS or email before applying a penalty, giving them at least a month to restore the balance.
Why the Stark Difference Between Banks?
The widening gap in penalty collections points to diverging strategies between private and public sector banks. Most PSBs have been moving away from these charges as part of a broader financial inclusion mandate. According to government data, 10 out of the 12 PSBs have completely discontinued MAB penalties on regular savings accounts. State Bank of India (SBI), for instance, waived these charges on savings accounts in March 2020, and its collections now primarily come from current accounts. In contrast, private banks, which often focus on a more urban customer base and have a stronger profit motive, continue to treat these fees as a steady source of income. This business model results in a heavier penalty burden on their customers.
Who Bears the Brunt?
While these penalties affect a wide range of customers, they disproportionately impact those with fluctuating or lower incomes. This includes students, gig economy workers, small business owners, and senior citizens, for whom maintaining a high and stable bank balance can be challenging. For these individuals, recurring penalties can slowly erode their savings, working directly against the goal of financial security. The government has taken steps to protect the most vulnerable through zero-balance accounts. Approximately 73 crore Basic Savings Bank Deposit Accounts (BSBDAs), including those opened under the Pradhan Mantri Jan Dhan Yojana (PMJDY), are exempt from any minimum balance requirements and their associated penalties.
How to Avoid These Charges
Staying on top of your bank's MAB rules is the best way to avoid unnecessary fees. First, understand the specific requirement for your account, as it can differ significantly between banks and even branches. If you find it difficult to maintain the required balance, consider switching to a zero-balance account offered by nearly all banks. Many PSBs have eliminated these fees on savings accounts, making them a safer option if your income is irregular. Finally, enable account alerts on your phone or email. Banks are required to notify you if your balance drops, and acting on that notification can save you from a penalty.
