The Data That Demands Attention
It’s a figure that’s difficult to ignore. In the fiscal year 2026 (FY26), Indian banks collected over ₹7,000 crore from customers solely for failing to maintain a Minimum Average Balance (MAB) in their accounts. This data, disclosed in a parliamentary
session, shines a harsh light on the significant and growing revenue banks are generating from service charges. The numbers show a clear trend: private sector banks are leading the charge, collecting ₹4,948.71 crore in MAB penalties, more than double the ₹2,137.92 crore collected by public sector banks. Over the last five years, the total collection from this single fee across all banks has swelled to a staggering ₹27,973 crore. This isn’t an isolated charge; it's part of a broader pattern of increasing fees that are quietly draining funds from millions of unsuspecting account holders.
The Anatomy of Modern Bank Fees
The minimum balance penalty is just the tip of the iceberg. A typical bank statement can be riddled with a variety of charges that many customers overlook. Among the most common are fees for ATM withdrawals beyond the free limit, which is set by the RBI at five transactions at a home bank's ATM and three at other banks' ATMs in metro cities. Beyond this, banks can charge up to ₹21 plus GST for each transaction. Other frequent deductions include annual debit card fees, charges for SMS alerts, cheque bounce penalties, and fees for cash transactions beyond specified limits. Some banks even levy charges for transaction declines at ATMs or point-of-sale machines due to insufficient balance. Cumulatively, these seemingly small amounts can cost an average customer between ₹2,000 and ₹2,500 every year.
Why Are Fees on the Rise?
The increasing reliance on fee-based income is not accidental. For years, banks have been grappling with pressure on their core income from lending. To offset these pressures and cover the operational costs of maintaining branches, ATMs, and digital infrastructure, banks have turned to service charges as a steady revenue stream. While public sector banks have moderated some of these charges—with State Bank of India, for instance, waiving MAB penalties on savings accounts since 2020—private sector banks have become more aggressive. HDFC Bank and Axis Bank alone accounted for about 58% of the total MAB penalties collected by all private banks in FY26, pulling in ₹1,798.14 crore and ₹1,081.33 crore respectively.
The Regulator's Stance on Transparency
The Reserve Bank of India (RBI) has not been silent on this issue. For years, it has issued guidelines advising banks that charges must be reasonable and transparent. The RBI mandates that banks must display all service charges prominently on their websites and inform customers of any changes in a timely manner. More recently, the regulator has taken specific action. In a significant move, the RBI barred banks from charging for SMS alerts related to compliance or awareness. It has also pushed for greater transparency in loan processing, mandating a 'Key Facts Statement' so borrowers know all associated costs upfront. Despite these efforts, complaints about non-transparent and unreasonable charges continue to be a major issue, prompting parliamentary committees to call for more customer-friendly alternatives.
Your Financial Self-Defence Guide
Vigilance is your best defence. Start by meticulously reviewing your bank statements every month. Question any charge you don't recognise. Secondly, understand the fee structure of your specific account. If you find it difficult to maintain the MAB, consider switching to a Basic Savings Bank Deposit Account (BSBDA) or a Jan Dhan account, which have no MAB requirements. Be mindful of ATM transaction limits to avoid extra charges. If you believe a charge is unfair or has been wrongly levied, the first step is to file a formal complaint with your bank. If the bank doesn't resolve the issue within 30 days or you're unsatisfied with the response, you have the right to escalate the matter to the RBI's Banking Ombudsman. This is a free-of-cost service designed to resolve customer complaints. You can file a complaint online through the RBI's Complaint Management System (CMS) portal.
