The Scale of the Charges
Recent data presented to the Rajya Sabha reveals a stark difference in fee collections between private and public sector banks (PSBs). For the fiscal year 2026, private banks collected a staggering ₹4,949 crore from customers just for failing to maintain
the minimum average balance (MAB) in their accounts. This figure is more than double the ₹2,138 crore collected by all 12 public sector banks combined for the same reason. The numbers highlight a significant revenue stream for private lenders, built from penalties that can often go unnoticed by account holders until they scrutinize their statements. Two banks alone, HDFC Bank and Axis Bank, accounted for nearly 58% of the total MAB penalties collected by all private banks.
Beyond Minimum Balance Penalties
While non-maintenance of minimum balance is a major charge, it's just one of many. Customers across all banks frequently encounter a variety of fees. These include charges for exceeding the free limit on ATM withdrawals, debit card issuance and annual maintenance fees, and costs for SMS alerts. Other common deductions are for chequebook re-issuance, charges for online fund transfers like NEFT/RTGS/IMPS beyond free limits, and fees for depositing or withdrawing cash at non-home branches. Although the Reserve Bank of India (RBI) has barred banks from charging for certain compliance-related SMS alerts, many other service charges remain at the discretion of the bank's board.
The Public vs. Private Divide
The divergence in fee collection, particularly for minimum balance penalties, reflects different operational philosophies. Many public sector banks have moved to scrap MAB charges on basic savings accounts, a step aimed at promoting financial inclusion. According to government statements, 10 out of 12 PSBs have discontinued these penalties for savings accounts. In contrast, private sector banks often justify their fee structures by pointing to their investment in technology, superior customer service, and a wider array of sophisticated financial products. For many customers, the convenience and features offered by private banks are worth the potential for higher fees, but the latest data underscores just how wide that cost gap has become.
The Regulator's Stance and Exemptions
The Reserve Bank of India mandates that banks must ensure their service charges are reasonable and not out of line with the average cost of providing those services. Banks are also required to be transparent about their fee structures, displaying them on their websites and notifying customers of any changes. Importantly, certain types of accounts are protected from some of these charges. Basic Savings Bank Deposit Accounts (BSBDAs), including those opened under the Pradhan Mantri Jan Dhan Yojana (PMJDY), are exempt from minimum balance requirements and any associated penalties, ensuring that access to basic banking remains free for millions.
How to Protect Your Money
In this environment, awareness is the best defence for a customer. The first step is to regularly review your bank statements to spot any unexpected deductions. Understand the specific fee schedule for your account type, which is available on your bank’s website. Pay close attention to the limits on free ATM transactions, both at your own bank's ATMs and others. If you find the charges on your account are too high, consider whether a different account type at the same bank or switching to another bank—perhaps a public sector one—might be more cost-effective. For those who struggle to maintain a high balance, inquiring about a zero-balance account could be the simplest way to avoid penalties altogether.
