The Staggering Scale of Penalties
Data presented by the Finance Ministry in the Rajya Sabha on July 28, 2026, shows that banks collected a combined ₹7,086 crore in penalties for non-maintenance of Minimum Average Balance (MAB) during the 2025-26 financial year alone. Over a four-year
period from FY23 to FY26, this figure swells to over ₹26,170 crore. The data highlights a significant disparity between private and public sector banks. In FY26, private banks collected ₹4,948.71 crore, more than double the ₹2,137.92 crore collected by their public sector counterparts. HDFC Bank led the collections with ₹1,798.14 crore in FY26, followed by Axis Bank at ₹1,081.33 crore. Among public sector banks (PSBs), Bank of Baroda was a top collector over a five-year period, while State Bank of India (SBI) reported significant collections primarily from its current accounts, having waived these fees for savings accounts in 2020.
Why Do Banks Charge These Fees?
Banks argue that MAB requirements are necessary to cover the operational costs of maintaining accounts, including branch services, ATM networks, and technology infrastructure. The funds held in these accounts also contribute to the bank's liquidity, which is essential for its lending operations. According to RBI guidelines, banks are permitted to set their own board-approved policies for these charges, as long as they are reasonable and transparent. Banks are also required to notify customers via SMS, email, or letter before applying penalties, giving them time to restore the minimum balance. However, critics argue that these charges disproportionately penalise customers for being poor and run counter to the national goal of financial inclusion.
The Human Cost of Minimum Balance
The burden of these penalties falls heaviest on those who can least afford them. This includes daily wage earners, gig economy workers, students, pensioners, and farmers, whose incomes are often irregular. For these individuals, a penalty of a few hundred rupees can significantly erode their already limited savings, creating financial stress and discouraging them from using the formal banking system. It creates a paradox where the poorest customers end up paying more for basic banking services. Consumer rights groups have frequently highlighted this issue, pointing out that high penalties can push vulnerable people away from banks, defeating the purpose of initiatives designed to bring more Indians into the financial fold.
A Tale of Two Banking Sectors
There is a growing divergence in how public and private sector banks approach this issue. According to the Finance Ministry, 10 out of the 12 public sector banks have completely discontinued penalties for not maintaining a minimum balance in regular savings accounts. This move is aimed at making banking more customer-friendly. In contrast, many private sector banks continue to rely on these fees as a steady source of income. The data from FY26 clearly shows this divide, with private banks accounting for nearly 70% of the total penalties collected during the year.
How to Avoid Minimum Balance Penalties
The most effective way for customers to avoid these charges is to opt for a Basic Savings Bank Deposit Account (BSBDA). Mandated by the RBI, all banks must offer these zero-balance accounts. BSBDA accounts, including those opened under the Pradhan Mantri Jan Dhan Yojana (PMJDY), do not have any MAB requirements and are therefore exempt from these penalties. As of 2026, there are approximately 730 million such accounts in India. These accounts come with essential services like a free ATM-cum-debit card and a set number of free withdrawals per month. If you have a regular savings account and struggle to maintain the minimum balance, you can request your bank to convert it into a BSBDA. It is important to note that a customer can hold only one BSBDA across all banks.
