The Numbers Behind the Penalties
Data presented to Parliament reveals a significant financial haul for banks from account holders unable to maintain a minimum average balance (MAB). In the fiscal year 2025-26, the total collection from these charges stood at approximately ₹7,100 crore.
Of this amount, private sector banks were the primary beneficiaries, collecting around ₹4,949 crore. This figure is more than double the ₹2,138 crore collected by all public sector banks (PSBs) combined. HDFC Bank led the pack, levying nearly ₹1,800 crore in MAB charges, followed by Axis Bank with over ₹1,081 crore. Together, these two giants accounted for almost 58% of all minimum balance penalties collected by private banks. Other significant collectors in the private space included ICICI Bank, Kotak Mahindra Bank, and Yes Bank.
A Tale of Two Banking Models
The disparity in collections points to a fundamental difference in strategy and mandate between private and public sector banks. Private banks, driven by a sharper focus on profitability and shareholder returns, often implement more stringent fee structures. Their business model is frequently geared towards urban and semi-urban customers, with products requiring higher average balances. In stark contrast, public sector banks have increasingly moved away from these charges as part of a broader financial inclusion agenda. According to government statements, 10 out of the 12 PSBs have completely discontinued penalties for non-maintenance of MAB in regular savings accounts. This has led to a significant drop in collections for PSBs, while private banks have seen their income from these fees grow. Even among PSBs that still collect these charges, like the State Bank of India, the fees are often restricted to specific account types, such as current accounts, rather than standard savings accounts for the general public.
What the RBI Rules Say
The Reserve Bank of India (RBI) does not set the minimum balance levels but has laid down clear guidelines for how banks can apply these charges. The central bank mandates that any penal charges must be reasonable and directly proportional to the extent of the shortfall. Banks cannot levy charges arbitrarily; they must have a board-approved policy with a clear slab structure for penalties. Furthermore, banks are required to notify customers via SMS, email, or letter about the shortfall and provide them with a reasonable time—at least one month—to restore the balance before any penalty is applied. The RBI's framework is designed to prevent banks from taking undue advantage of customer inattention, ensuring a degree of fairness and transparency in the process.
How Customers Can Avoid These Charges
For consumers, navigating these charges can be a challenge, but several effective strategies exist. The most straightforward solution is to opt for a zero-balance account. Many banks, including most PSBs like State Bank of India, offer Basic Savings Bank Deposit (BSBD) accounts, which are exempt from MAB requirements. There are an estimated 73 crore such accounts, including those under the Pradhan Mantri Jan Dhan Yojana (PMJDY), that offer essential banking services without the threat of penalties. Another option is to choose a bank that has waived these fees on all or most of its savings accounts. For those who need to stick with a bank that has MAB rules, setting up balance alerts via SMS or a banking app can provide a timely warning before the balance drops too low. Finally, carefully reading the account's terms and conditions before opening it remains the most crucial step in preventing unexpected deductions.
