India’s Top Banks Collect Billions in Penalty Charges for Non-Maintenance of Minimum Average Balance

India’s top banks have collected billions of rupees in penalty charges from customers for failing to maintain the minimum average balance (MAB) in their savings accounts. According to data shared by the Ministry of Finance, HDFC Bank, Axis Bank, and Bank of Baroda were the top three banks that collected the highest penalty charges from their customers for the non-maintenance of the MAB.

Top Banks Collect Highest Penalties for Non-Maintenance of Minimum Average Balance

HDFC Bank collected around Rs 5,670 crore penalty, Axis Bank collected Rs 3,787 crore, and Bank of Baroda collected nearly Rs 2,028 crore from its customers in the form of penalty for the non-maintenance of the MAB. Punjab National Bank is in fourth position with Rs 1,896 crore penalty, while Indian Bank has Rs 1,777 crore penalty collected from customers from FY 21-22 to FY 25-26.

Private Sector Banks Lead in Penalty Collections

The data shows that HDFC Bank and Axis Bank are ranked first and second for the penalties collected from FY 22-23 to FY 25-26. ICICI Bank was third, with total collections of Rs 1,578.29 crore. Kotak Mahindra Bank collected Rs 998.41 crore over the four-year period.

Public Sector Banks Review Service Charge Structures

• Out of the 12 public sector banks, 10 have discontinued penal charges for the non-maintenance of the MAB in savings accounts.
• The remaining two banks have rationalised these charges in line with their board-approved policies and commercial considerations.
• The government said public sector banks have reviewed their service charge structures to make banking more customer-friendly.

Key Takeaways

• HDFC Bank collected the highest penalty of Rs 5,670 crore for non-maintenance of MAB.
• Axix Bank collected Rs 3,787 crore in penalty charges.
• Bank of Baroda collected Rs 2,028 crore in penalty charges.

FAQs

What is the minimum average balance (MAB)?

The MAB is the average balance that customers are required to maintain in their savings accounts to avoid penalty charges.

What are the RBI rules on minimum balance charges?

As per the RBI’s instructions, banks can levy charges for the non-maintenance of the MAB in accordance with their Board-approved policies, subject to such charges being reasonable, transparent, and commensurate with the cost of providing the services.

What happens if customers fail to maintain the MAB?

In cases of non-maintenance of the agreed minimum balance in bank accounts, banks have been advised by the RBI to notify customers through SMS, email, letter or other appropriate means. Customers are generally provided time to restore the required minimum balance before penal charges are applied.

Conclusion

The data highlights the need for banks to review their service charge structures and make banking more customer-friendly. The government’s efforts to promote financial inclusion and reduce penalty charges for customers are a step in the right direction. As customers, it is essential to understand the terms and conditions of our bank accounts and maintain the required minimum balance to avoid penalty charges.