Indian banks collect billions in penalties for non-maintenance of minimum balance

As many as 21 public sector banks and three major private sector lenders collected a whopping INR 5,000 crore (approximately Dh183.6 billion) from customers for non-maintenance of minimum balance in their accounts in 2017-18, according to banking data. 

India’s government-owned lender State Bank of India (SBI) alone collected almost 50 per cent of this amount at INR 2,433.87 crores. The bank had suffered a staggering net loss of INR 6,547 crore (Dh240.48 billion) during 2017-18, but this penalty fee of billions saved them from posting exponentially higher losses this year.


SBI re-introduced the penalty on deposits going below monthly average balance basis from April 2017, after having scrapped it in 2012. However, after widespread complaints from customers and accusations of using these fees to drive down losses, the bank reduced the penalty fee in October last year.

SBI penalties

According to the bank’s website, SBI customers holding savings bank accounts with the bank’s ‘metro’ and ‘urban’ branches are required to maintain a monthly average balance (MAB) of INR 3,000. Customers in ‘semi-urban’ and ‘rural’ SBI branches are required to maintain MAB of INR 2,000 and INR 1,000 respectively. For a customer in a metro or urban branch; a shortfall of 50 per cent or less has a penalty of INR 30 plus Goods and Services Tax (GST), a shortfall between 50 and 75 per cent incurs a penalty of INR 40 plus GST and a shortfall of more than 75 per cent has a penalty of INR 50 plus GST.

The SBI website also includes that this penalty is not applicable to some specific accounts which include the Basic Savings Bank Account, Financial Inclusion Accounts, No Frill Accounts, Salary Package Accounts and Small Accounts.

 

SBI amassed nearly half the amount raised by the 24 banks put together (INR 4,989.55 crore).

Other banks

After SBI, the largest amount of charges for not maintaining minimum balance during 2017-18 was collected by HDFC Bank. It charged its customers INR 590.84 crore, which is lower than INR 619.39 crore in 2016-17, the data revealed. Axis Bank collected INR 530.12 crore in the last fiscal while ICICI Bank charged INR 317.6 crore.

 According to the RBI norms, banks are permitted to levy service/miscellaneous charges.

Customers opening accounts under Basic Savings Bank Deposit (BSBD) scheme as well as Pradhan Mantri Jan Dhan Yojna are not required to maintain any minimum balance. 

NRI accounts

For most Indian origin residents in the UAE, NRI (Non-resident Indian) accounts are offered by banks that levy no taxes on income credited from abroad. However, most banks do charge minimum balance fees on NRI accounts. For example, ICICI has minimum balances for NRI accounts starting at INR 2,000; the penalty for shortfall is INR100 in addition to 5 per cent of the shortfall. Similarly major banks including Axis Bank, Federal Bank, SBI and more charge fees on non-maintenance of minimum balance. Contact your bank to understand the fees associated and limits set. 

*With inputs from agencies

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