A ₹7,100 Crore Windfall for Banks
Indian banks' collections from penalties for non-maintenance of Minimum Average Balance (MAB) surged to nearly ₹7,100 crore in the financial year 2025-26. According to data presented in Parliament, this figure is up from approximately ₹6,800 crore in the previous
year, highlighting a consistent and growing source of revenue for the banking sector. This increase has once again put the spotlight on banking fees and their impact on the average consumer, especially at a time when digital transactions are being encouraged.
The Great Divide: Private vs. Public Banks
The data reveals a stark difference in strategy between private and public sector banks (PSBs). Private banks were the primary drivers of this revenue, collecting nearly 70% of the total amount, which comes to around ₹4,949 crore. This represents a 17% increase for private lenders in a single year. HDFC Bank led the pack, collecting an estimated ₹1,798 crore, followed by Axis Bank with ₹1,081 crore. In contrast, public sector banks have been moving in the opposite direction. Ten out of the 12 PSBs have discontinued penal charges on savings accounts altogether, leading to a decline in their collective penalty income from ₹2,775 crore in 2024-25 to ₹2,137 crore in FY26. Banks like SBI now only levy these charges on current accounts.
Understanding the Minimum Balance Rule
So, what exactly is a Minimum Average Balance? It's not the balance you need to have at the end of every single day. Instead, banks calculate the average of your closing balance for every day of the month. This average must stay above a certain threshold set by the bank, which often varies based on your branch location (metro, urban, or rural) and account type. Banks argue that these charges are necessary to cover the operational costs of maintaining accounts. However, critics point out that the burden often falls on those least able to afford it, such as students, pensioners, and low-income earners with fluctuating cash flows.
Why Are the Charges Increasing Now?
Several factors contribute to the rising penalty collections, especially among private banks. For one, private lenders often position themselves as premium service providers, which comes with stricter fee structures. They use higher minimum balance requirements to attract more stable, high-value customers, as these accounts provide a cheap source of funds for the bank to lend. As more customers flock to private banks for their perceived better service and digital offerings, more people are subject to their MAB policies. The Reserve Bank of India (RBI) allows banks to set their own board-approved policies on MAB, as long as the charges are reasonable and transparent.
How You Can Avoid These Penalties
The good news is that these charges are entirely avoidable with a little bit of awareness. First, know your account type. The government has made it clear that Basic Savings Bank Deposit Accounts (BSBDA), including those opened under the Pradhan Mantri Jan Dhan Yojana (PMJDY), are completely exempt from minimum balance requirements. If you don't need the bells and whistles of a premium account, a BSBDA is your safest bet. Second, understand your bank's policy. Most PSBs have waived these fees for savings accounts. If you are with a private bank, check their specific MAB requirement and track your balance regularly using the bank's mobile app. Finally, consider consolidating your accounts. Managing one or two accounts is much easier than juggling several, which reduces the risk of one of them accidentally dipping below the required balance.
