The Billion-Rupee Penalty Box
According to data presented in Parliament, banks in India collected close to Rs 7,100 crore from customers for failing to maintain a minimum average balance (MAB) during the 2025-26 financial year. This figure is part of a larger trend, with total collections
from such penalties exceeding Rs 26,000 crore over a recent four-year period. A significant portion of these charges, nearly 70%, was levied by private sector banks, which saw their penalty collections rise by 17% in FY26. HDFC Bank led the collections with nearly Rs 1,800 crore, followed by Axis Bank at over Rs 1,081 crore. In contrast, many public sector banks (PSBs) have been moving away from these charges. Ten out of the 12 PSBs have discontinued MAB penalties on savings accounts, leading to a decline in their collective penalty revenue. However, some, like the State Bank of India, still apply these charges to current accounts.
Decoding the Most Common Charges
The Minimum Average Balance (MAB) penalty is the most significant charge, but it is far from the only one. Customers often face a variety of fees that can quietly erode their savings. These include charges for exceeding the number of free ATM transactions, annual debit card fees, fees for issuing new cheque books beyond the free limit, and penalties for bounced cheques or failed ECS mandates. Banks also charge for services that many customers might assume are free, such as requesting a physical statement or making transactions in a branch that could have been done online. While the Reserve Bank of India (RBI) mandates that banks must keep charges reasonable and transparent, these small deductions can add up to thousands of rupees per year for an unsuspecting account holder.
Your First Line of Defence: Bank Alerts
In this environment, transaction alerts are no longer just a convenience; they are a critical tool for financial self-defence. Banks are required to notify customers via SMS or email before applying penal charges for MAB non-maintenance, giving them a chance to restore the balance. But you can, and should, go further. Setting up custom alerts through your bank’s mobile app or website can provide real-time updates on your account activity. You can create alerts for low balances, large purchases, ATM withdrawals, and online transfers. These notifications serve two purposes: they help you track your spending to stay within budget and provide an immediate warning against fraudulent or unauthorised transactions. Receiving an alert for a transaction you did not make allows you to contact your bank and block your card instantly, preventing further financial loss.
How to Proactively Minimise Fees
Beyond setting up alerts, several simple habits can help you avoid unnecessary charges. First, understand the specific requirements of your account. If you consistently struggle to maintain the minimum balance, consider switching to a Basic Savings Bank Deposit Account (BSBDA) or a zero-balance account, which are exempt from these penalties. Nearly 73 crore such accounts already exist, offering basic services without MAB requirements. Second, be strategic with your ATM use. Stick to your own bank’s ATMs, as transactions at other banks’ machines are limited to three free per month in metro areas. Third, opt for digital services. Choose e-statements over physical copies and use net banking or mobile apps for transfers like NEFT and RTGS, which are often cheaper or free compared to in-branch services. Finally, regularly review your bank statements to catch any unexpected charges and ensure you haven't been debited for services you don't use.
