The Anatomy of a Rs 7,100 Crore Penalty
Information shared in Parliament revealed that Indian banks levied close to Rs 7,100 crore in penalties for non-maintenance of Minimum Average Balance (MAB) during the 2025-26 fiscal year. This figure marks an increase from the previous year's Rs 6,800
crore. Private sector banks were the largest collectors, accounting for nearly 70% of the total, with their collections rising by 17% in one year. HDFC Bank led the charge, collecting nearly Rs 1,800 crore, followed by Axis Bank with Rs 1,081 crore. In contrast, Public Sector Banks (PSBs) saw their collections decline as many have discontinued these penalties on savings accounts. Still, names like State Bank of India (primarily from current accounts) and Bank of Baroda contributed significantly to the total.
Decoding Minimum Balance Requirements
So, what exactly is this rule that’s costing Indians thousands of crores? Most banks require you to maintain a Minimum Average Balance (MAB) or Average Monthly Balance (AMB). This is not the balance at the end of the month, but the average of your closing balance each day over that month. For example, if the MAB is Rs 5,000, you can dip below it on some days as long as you have a higher balance on other days to maintain the monthly average. The Reserve Bank of India (RBI) allows banks to set their own charges, provided they are reasonable and transparent. Banks are also required to notify customers via SMS or email before applying charges, giving them time to restore the balance.
How Different Banks Levy Charges
The rules and charges vary significantly from one bank to another and even based on your branch location—metro, urban, semi-urban, or rural. Private banks are generally stricter with their requirements. For instance, HDFC Bank's requirements can range from Rs 2,500 to Rs 10,000 depending on the location, with penalties of up to Rs 600. In good news for many, most public sector banks have made banking more customer-friendly. Ten out of the 12 PSBs have discontinued MAB penalties on regular savings accounts. SBI, for example, waived these charges on its savings accounts back in March 2020.
Are You Exempt? The Power of Zero-Balance Accounts
The best way to be completely free of minimum balance worries is to have an account that doesn't require one. The government and RBI have pushed for financial inclusion through specific account types that are exempt from MAB rules. The most prominent are the Basic Savings Bank Deposit Accounts (BSBDA), which include those opened under the Pradhan Mantri Jan Dhan Yojana (PMJDY). These accounts are designed to offer essential banking services without any charge and with no minimum balance requirement. Currently, around 730 million such accounts are exempt from these penalties, providing a safety net for a massive number of citizens.
Your Action Plan to Avoid Penalties
Knowledge is power, and when it comes to banking, it's also money saved. Here are simple steps to ensure your money stays in your pocket: 1. Know Your Account Type: Log in to your net banking portal or check your passbook to confirm the type of savings account you have and its specific MAB requirement. 2. Monitor Regularly: Make it a habit to check your balance using your bank's mobile app. This helps you stay aware of your daily balance and overall average. 3. Convert Your Account: If you are eligible, ask your bank to convert your regular savings account to a BSBDA or another zero-balance variant. Remember, you can typically hold only one BSBDA across all banks. 4. Set Up Alerts: Most banking apps allow you to set up alerts for when your balance dips below a certain threshold. 5. Choose the Right Bank: If you consistently struggle to meet the MAB at a private bank, consider moving your primary account to a public sector bank that has waived these fees on savings accounts.
