Putting the Numbers in Context
The massive Rs 4,948.71 crore penalty was collected by private sector banks during the 2025-2026 fiscal year. This data, presented in the Rajya Sabha, highlights a significant divergence in banking practices. During the same period, India's 12 public
sector banks (PSBs) collected Rs 2,137.92 crore — less than half the amount. This disparity is even starker considering that ten out of the twelve PSBs have completely stopped levying penalties for non-maintenance of minimum balance on regular savings accounts. Among the private lenders, HDFC Bank was the top collector, charging its customers Rs 1,798.14 crore, followed closely by Axis Bank at Rs 1,081.33 crore. Together, these two banks accounted for nearly 58% of all minimum balance penalties collected by private banks in that year.
Why Do Banks Levy These Charges?
Banks justify minimum balance requirements, often called Average Monthly Balance (AMB), by stating they are necessary to cover the costs of providing services. These include branch operations, ATM networks, and the technology behind digital banking. When an account balance falls below the prescribed threshold, banks argue it becomes unprofitable to service. The charges are meant to be proportional to the shortfall, based on a slab structure approved by the bank's board. However, the practice has become a major point of contention, especially as many public sector banks have proven it's possible to operate without penalising customers for low balances in savings accounts. For instance, State Bank of India (SBI) waived these charges on its savings accounts back in March 2020, and its collections now primarily come from current accounts.
Understanding the Rules of Engagement
The Reserve Bank of India (RBI) has laid down specific guidelines for these penalties. Banks cannot levy charges arbitrarily. They must first notify a customer via SMS, email, or letter if their balance dips below the minimum requirement. The customer must then be given a grace period of at least one month to restore the balance before any penalty can be applied. The charges themselves must be reasonable and directly proportional to the extent of the shortfall. Importantly, these rules do not apply to Basic Savings Bank Deposit Accounts (BSBDA), including those opened under the Pradhan Mantri Jan Dhan Yojana (PMJDY), which are designed to be zero-balance accounts to promote financial inclusion.
How to Protect Your Account from Penalties
The best defence is a good offence: being aware and proactive. The simplest way to avoid charges is to opt for a zero-balance account. All banks are required to offer BSBDA accounts, which come with no minimum balance requirement. Many private banks also offer competitive zero-balance digital accounts, such as Kotak Mahindra Bank's 811 account or IDFC First Bank's Pratham Savings Account. If you prefer a regular savings account, be sure to understand its specific AMB requirement, which often varies based on whether the branch is in a metro, urban, or rural area. Set up balance alerts through your bank’s mobile app to receive a notification if your balance is close to the threshold. If you find the AMB requirement of your current bank too high, consider switching to a PSB or another private bank with more lenient rules.
