Minimum balance charges continue to be a significant source of fee income for several private sector banks. Fresh data presented in Parliament reveals that three leading private banks collected more through minimum balance penalties over the past four financial years than all twelve public sector banks combined. The figures have reignited discussions around customer-friendly banking practices and financial inclusion.

According to information provided in Parliament:

• HDFC Bank collected more than ₹5,669 crore in minimum balance penalties between FY23 and FY26.
• Axis Bank collected about ₹3,787 crore.
• ICICI Bank collected around ₹1,578 crore.
• Together, these three private banks collected over ₹11,000 crore, exceeding the combined collections of all 12 public sector banks during the same period.

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The Finance Ministry stated that most public sector banks have either:

• Completely discontinued minimum balance penalties on savings accounts, or
• Substantially rationalised these charges.

State Bank of India, for example, stopped charging penalties for non-maintenance of the Minimum Average Balance (MAB) in savings accounts from March 2020, although certain current account charges may still apply. 

Banks may levy minimum balance charges in accordance with RBI guidelines, provided the charges are:

• Transparent.
• Reasonable.
• Approved by the bank's Board.

Customers should normally receive advance communication through SMS, email or other channels before penalties are applied. Banks also offer zero-balance Basic Savings Bank Deposit Accounts (BSBDAs), including PM Jan Dhan Yojana accounts, which are exempt from such penalties. 2

Simple steps can help avoid unnecessary penalties:

• Know the minimum balance requirement for your account.
• Enable SMS and email alerts.
• Maintain a small buffer above the required balance.
• If eligible, consider a zero-balance savings account.
• Review your bank's schedule of charges periodically.

Investor Takeaway

Indian-Share-Tips.com Nifty Expert Gulshan Khera, CFP®, who is also a SEBI Registered Investment Adviser, observes that fee income is an important revenue source for banks, but customer-friendly policies also play a vital role in long-term franchise value. Investors should evaluate banks not only on profitability but also on customer acquisition, service quality, deposit growth and sustainable business practices.

Read more banking and market insights at Indian-Share-Tips.com.

Written by Indian-Share-Tips.com, which is a SEBI Registered Advisory Services.

Disclaimer: This article is for educational and informational purposes only. It is based on information presented in Parliament and publicly reported data. It should not be construed as financial or investment advice.