The ₹7,086 Crore Deduction
In the financial year 2025-26, Indian banks collectively charged customers over ₹7,086 crore for failing to maintain the Minimum Average Balance (MAB) in their accounts. This data, presented by the Ministry of Finance in the Rajya Sabha, shines a light
on a significant, yet often overlooked, cost of banking for millions. The numbers show a clear divide in the banking sector. Private sector banks were the primary drivers of these charges, collecting approximately ₹4,949 crore, which is more than double the ₹2,138 crore collected by all public sector banks (PSBs) combined. This trend has been consistent, with private banks accounting for nearly 61% of total MAB penalties over the last four fiscal years.
Who is Charging the Most?
The data reveals a high concentration of these charges among a few large private lenders. HDFC Bank and Axis Bank alone accounted for nearly 58% of all minimum balance penalties collected by private banks in FY26. HDFC Bank led the pack, levying around ₹1,798 crore, with Axis Bank following at ₹1,081 crore. Other significant collectors in the private space included ICICI Bank, Kotak Mahindra Bank, and Yes Bank. Among public sector banks, State Bank of India (SBI) reported the highest collection at ₹477 crore. However, the government clarified that SBI's charges pertain only to current accounts, as the bank waived MAB penalties on all its savings accounts back in March 2020. In fact, a positive trend is that 10 out of 12 PSBs have now completely discontinued these penalties on savings accounts.
Why These Fees Exist
From a bank's perspective, MAB rules and the associated penalties are not arbitrary. They are implemented to cover the operational costs associated with maintaining an account, such as technology, staff, and branch services. Accounts with very low balances are often seen as economically unviable for the bank, as they don't generate enough revenue to offset these costs. The penalties act as a disincentive for holding such accounts and a means to recoup administrative expenses. The Reserve Bank of India (RBI) has stipulated that these charges must be reasonable and that banks must notify customers before applying penalties, giving them time to restore the required balance. However, critics argue the practice disproportionately affects those with irregular incomes, such as students, daily wage earners, and small business owners, directly conflicting with the national goal of financial inclusion.
How to Avoid Minimum Balance Fees
The good news for customers is that these charges are entirely avoidable. The most effective way is to open a Basic Savings Bank Deposit (BSBD) account, which includes those opened under the Pradhan Mantri Jan Dhan Yojana (PMJDY). These accounts are specifically designed for financial inclusion and have a zero-balance requirement, meaning no MAB penalties can be levied. The RBI has recently standardised the rules for BSBD accounts, effective from April 2026, to ensure they come with a host of free services, including a free ATM-cum-debit card, a minimum number of free withdrawals per month, and unlimited digital transactions. Any customer can request their bank to convert a regular savings account into a BSBD account, and banks are mandated to complete the process within seven days. The only condition is that an individual cannot hold more than one BSBD account across all banks.
