Over the past five fiscal years (FY2020–25), 11 public sector banks in India have collected nearly ₹9,000 crore in penalties from customers who failed to maintain the prescribed minimum balances in their savings accounts. It’s easy to overlook a small shortfall one month, but when multiplied by millions of account holders and levied consistently, these charges balloon into staggering sums.
For customers, even modest monthly charges—from ₹10 to ₹100—can add up. Financially weaker sections, daily wage earners, and small traders in semi-urban and rural areas often struggle to maintain balances of ₹3,000–10,000.
Experts warn that these penalties sometimes eat into welfare benefits deposited in these accounts, discouraging the very people digital banking aims to include.
In response to public concern, State Bank of India abolished minimum-balance penalties in March 2020. Following an advisory from the Department of Financial Services, seven more PSBs have announced they will waive these charges from the second quarter of FY2025–26 to provide relief to vulnerable customers in semi-urban and rural regions.
Below is the bank-wise breakdown of penalties collected between FY2020 and FY2025 as reported by the Ministry of Finance:
| Bank | Penalties Collected (₹ Crore) |
|---|---|
| Indian Bank | 1,828.18 |
| Punjab National Bank | 1,662.42 |
| Bank of Baroda | 1,531.62 |
| Canara Bank | 1,152.92 |
| Bank of India | 809.66 |
| Central Bank of India | 585.36 |
| Bank of Maharashtra | 535.20 |
| Union Bank of India | 484.75 |
| UCO Bank | 119.91 |
| Punjab & Sind Bank | 100.92 |
| Indian Overseas Bank | 62.04 |
| Total | 8,872.98 |
These penalties stem from RBI guidelines issued in 2014–15, which empower banks to set Board-approved policies for minimum average balance requirements and reasonable service fees, including penal charges for non-compliance. The idea was to recover account-maintenance costs, instill discipline, and keep no-frills accounts sustainable. However, critics point out that banks effectively treated these fees as a reliable revenue stream.
While public sector banks move toward waivers, many private banks still levy higher non-maintenance charges, prompting calls for a standardized, inclusive approach across the banking sector. Proposals include tiered account structures, zero-balance options with limited free transactions, and automated low-balance alerts—measures designed to protect small depositors without compromising bank viability.
Ultimately, penalties for minimum balance shortfalls were meant to cover operational costs and enforce account discipline.
The recent policy shifts reflect a growing recognition that the banking system must balance cost recovery with genuine financial inclusion, ensuring that millions of low-balance customers can keep their accounts active without fear of punitive charges.
Banking for all – should not be a dream anymore, we need innovative solutions which can bring down cost for maintenance of average account.
New wallet-based transaction system like e-rupee could provide a viable solution for welfare-based accounts. Our banks have best intent as they provide waivers but in long run, we need to balance the practical aspects and higher purpose of banking, i.e., empower, uplift and fuel sustainable progress.