The Billion-Rupee Penalty Box
According to recent data shared by the Ministry of Finance in Parliament, Indian banks collected over ₹26,170 crore from customers for failing to maintain the Minimum Average Balance (MAB) in their accounts between the financial years 2023 and 2026. In the last
fiscal year alone (FY26), these charges amounted to over ₹7,086 crore. This data, compiled from public sector banks and the Reserve Bank of India (RBI), paints a clear picture of a significant, recurring cost for many account holders. The headline figure of nearly Rs 300 crore is a fraction of this larger, multi-year collection that highlights a consistent financial pressure point for customers.
Why Banks Levy These Charges
Banks justify MAB penalties by stating they cover the operational costs of maintaining accounts, providing services like debit cards, ATM access, and branch operations. The RBI allows banks to set their own board-approved policies for these charges, with the condition that they must be reasonable, transparent, and proportionate to the cost of services. Banks are also required to notify customers via SMS, email, or letter before applying a penalty, giving them at least a month to restore the required balance. However, the rules also state that these charges should not cause an account balance to become negative.
Private vs. Public Banks: A Clear Divide
The data reveals a stark difference between private and public sector banks. In FY26, private banks collected ₹4,949 crore in MAB penalties, more than double the ₹2,138 crore collected by all 12 public sector banks (PSBs) combined. HDFC Bank and Axis Bank were the top two collectors among private lenders. This gap is largely because most major public sector banks have stopped levying these penalties on regular savings accounts. As of recent reports, 10 out of 12 PSBs, including the State Bank of India (since 2020), have discontinued these charges to promote more customer-friendly banking.
How to Protect Your Money from Penalties
The best way to avoid these fees is to be proactive. First, understand your bank's MAB requirement, which can vary based on your account type and branch location (rural, semi-urban, or metro). If you find it difficult to maintain the required balance, consider switching to a zero-balance account. All banks are mandated by the RBI to offer Basic Savings Bank Deposit Accounts (BSBDA), including those under the Pradhan Mantri Jan Dhan Yojana (PMJDY). These accounts have no minimum balance requirement and offer essential banking services. Currently, around 73 crore such accounts are exempt from MAB penalties. You can ask your bank to convert your existing savings account into a BSBDA, though you may have to close other savings accounts with that bank within 30 days.
Know Your Rights and Options
As a customer, your primary right is to be informed. Banks must notify you before levying a charge and give you time to rectify the balance. If you have multiple accounts, consider consolidating them to make maintaining the MAB easier. Many banks also offer options where holding a fixed deposit of a certain amount can waive the MAB requirement for your savings account. Salary accounts are also typically zero-balance accounts. By understanding the rules and exploring the options available, you can ensure your hard-earned money stays in your account, rather than being paid out in penalties.
