The Scale of the Charges
Data presented to Parliament revealed that banks collected a staggering Rs 7,086 crore in penalties for non-maintenance of Minimum Average Balance (MAB) in the financial year 2025-26. This isn't a one-off event; over a four-year period from FY23 to FY26,
the total collection from these charges surpassed Rs 26,170 crore. The collections are not evenly split. Private sector banks accounted for the lion's share, levying approximately Rs 4,949 crore in FY26, more than double the Rs 2,138 crore collected by public sector banks (PSBs). Among private lenders, HDFC Bank and Axis Bank were the top collectors, together accounting for nearly 58% of the penalties in their category. This data highlights how small, recurring charges on millions of accounts can accumulate into a massive revenue stream for the banking sector.
What Exactly Are Minimum Balance Charges?
Most savings and current accounts require you to maintain a certain 'Minimum Average Balance', often abbreviated as MAB. This is not the minimum balance at the end of the month, but the average of the closing balance in your account each day over that month (or sometimes, a quarter). Banks justify these charges as necessary to cover the operational costs of maintaining accounts, from branch services to digital infrastructure. The required MAB varies widely depending on the bank, the type of account, and the branch location (metro, urban, or rural), with amounts typically ranging from Rs 1,000 to Rs 10,000. If your average balance dips below this prescribed limit, a penalty is automatically debited from your account. These charges can range from Rs 150 to over Rs 600, often calculated based on the extent of the shortfall.
A Welcome Shift in Public Sector Banks
There's a positive trend emerging from public sector banks. According to government data, 10 out of the 12 PSBs have completely discontinued levying penalties for non-maintenance of MAB on regular savings accounts. This move is aimed at promoting more customer-friendly and inclusive banking. For instance, State Bank of India (SBI), the country's largest lender, waived these charges on its savings accounts back in March 2020. The penalties it collected in FY26, amounting to Rs 477 crore, were from current accounts, not savings accounts. This shift puts pressure on private banks, whose collections from these fees have continued to rise.
Your Guide to Avoiding Minimum Balance Fees
The good news is that these charges are entirely avoidable with a bit of awareness and planning. Here are five practical steps you can take: 1. Switch to a Zero-Balance Account: The simplest solution is to opt for an account that doesn't require a minimum balance. Basic Savings Bank Deposit Accounts (BSBDA), including those under the Pradhan Mantri Jan Dhan Yojana (PMJDY), are designed for this purpose. Many banks also offer other types of zero-balance accounts. You can often convert your existing savings account by visiting your branch and filling out a form. 2. Understand Your Account's Rules: Check your bank's website or visit your branch to know the exact MAB requirement for your specific account type and branch location. Knowledge is your first line of defence. 3. Consolidate Your Funds: If you have multiple bank accounts with small balances, consider consolidating your funds into one or two primary accounts. This makes it easier to meet the MAB requirement without spreading your money too thin. 4. Set Up Balance Alerts: Most banking apps allow you to set up alerts that notify you when your balance drops below a certain threshold. This can serve as a timely reminder to add funds and avoid a penalty. 5. Park a Buffer Amount: If you choose to keep an account with an MAB requirement, a simple strategy is to keep an amount slightly higher than the required minimum as a buffer. This protects you from accidental dips in your balance.
