The Scale of the Penalties
Data presented to Parliament reveals that banks collected close to Rs 7,100 crore in penalties for non-maintenance of Minimum Average Balance (MAB) during the financial year 2025-26. This represents a slight increase from the approximately Rs 6,800 crore collected in the previous
year. While a penalty on a single account may seem small, these charges accumulate into a significant revenue stream for the banking sector when applied across millions of accounts nationwide. The total collection from these charges over the last four financial years (FY23-FY26) has crossed a massive Rs 26,170 crore.
Who Collected the Most?
Private sector banks were the primary collectors of these fees, accounting for nearly 70% of the total in FY26, amounting to Rs 4,949 crore. This was more than double the amount collected by public sector banks (PSBs). Among private lenders, HDFC Bank led with collections of around Rs 1,800 crore, followed by Axis Bank at Rs 1,081 crore. In contrast, collections by the 12 PSBs declined to Rs 2,137 crore in FY26. This is largely because 10 out of the 12 public sector banks have stopped levying these penalties on regular savings accounts as a customer-friendly measure. State Bank of India (SBI), for instance, waived these charges on its savings accounts in March 2020, and its reported collections now pertain only to current accounts.
Understanding Minimum Balance Rules
Most banks require customers holding a regular savings account to maintain a certain Minimum Average Balance. This amount varies depending on the bank and the branch location—metro, urban, semi-urban, or rural—and can range from Rs 1,000 to over Rs 10,000. The average balance is calculated by summing the closing balance of each day in a month and dividing it by the number of days in that month. If this average falls below the prescribed limit, a penalty is automatically debited from the account. The Reserve Bank of India (RBI) mandates that these charges must be reasonable, transparent, and proportional to the shortfall. Banks are also required to notify customers via SMS, email, or letter before applying a penalty, giving them at least a month to restore the balance.
The Impact on Small Depositors
These penalties disproportionately affect individuals with fluctuating or low incomes, such as students, gig economy workers, and those in the informal sector. For these customers, small, recurring deductions can significantly erode their savings over time. The charges are often levied on accounts that many customers may not be actively monitoring, leading to a silent drain on their funds. While banks justify these fees as necessary to cover the operational costs of maintaining accounts, the sheer volume of the collections has sparked a debate about the balance between commercial interests and financial inclusion.
How to Avoid Minimum Balance Penalties
The good news is that there are ways to avoid these charges. The most effective method is to opt for a Basic Savings Bank Deposit Account (BSBDA), which is a zero-balance account. Banks are mandated by the RBI to offer BSBDA, which includes accounts opened under the Pradhan Mantri Jan Dhan Yojana (PMJDY). These accounts provide essential banking services like a free ATM-cum-debit card and a passbook without any minimum balance requirement. However, they often come with limitations, such as a cap of four free withdrawals per month. If you have a regular savings account and struggle to maintain the balance, you can request your bank to convert it into a BSBDA. An existing savings account must typically be closed within 30 days of opening a BSBDA with the same bank.
