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Indian Banks Amass Nearly ₹8,900 Crore in Minimum Balance Penalties Over 5 Years; Parliamentary Data Reveals Disparity

Data tabled by the Ministry of Finance in Parliament has brought renewed regulatory and consumer scrutiny to retail banking fee structures, revealing that Indian commercial banks collected nearly ₹8,900 crore in customer penalties for failing to maintain the required Minimum Average Balance (MAB) over a five-year period.

Economy2 min read

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Between FY 2019-20 and FY 2023-24, Public Sector Banks (PSBs) alone accounted for ₹8,495 crore of these penalty revenues, highlighting the silent cost borne by retail depositors.

The Institutional Breakdown: Who Collected What?

Following public criticism, State Bank of India (SBI)—the country's largest lender—permanently eliminated minimum balance penalties across all retail savings accounts in March 2020, registering zero penal collections over the subsequent four fiscal years.

In contrast, other state-owned institutions recorded substantial non-interest revenues:

  • Punjab National Bank (PNB): Collected ₹1,538 crore, leading all public sector lenders (PNB subsequently announced a waiver of MAB charges effective July 1, 2025).
  • Indian Bank: Accumulated ₹1,466 crore in non-maintenance charges.
  • Bank of Baroda (BoB): Recorded ₹1,251 crore in depositor penalties.
  • Canara Bank: Registered ₹1,158 crore during the same five-year window.

Regulatory Safeguards vs. Ground Reality

Under Reserve Bank of India (RBI) prudential guidelines, banks are prohibited from allowing account balances to turn negative due to the levy of penal charges. Furthermore, Basic Savings Bank Deposit Accounts (BSBDAs) and Pradhan Mantri Jan Dhan Yojana (PMJDY) accounts—which collectively exceed 72 crore accounts—remain strictly exempt from balance requirements.


Consumer advocates argue that penalizing low-balance depositors creates a regressive levy: with savings interest rates averaging 2.70%–3.00%, a quarterly penalty of ₹150–₹300 frequently exceeds the total annual interest earned, eroding the savings of small depositors in a digital-first economy.

Why it matters

However, commercial banks justify MAB penalties on standard savings accounts as essential operational recovery for maintaining Core Banking Solution (CBS) infrastructure, compliance tracking, and branch overheads.

Every RBI penalty on a lender this year →

Sources

Finsamudra Desk23 Oct 2026, 12:44 pm IST
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