Indian Banks Collected Over ₹26,170 Crore in Minimum Balance Penalties Between FY23 and FY26

Indian banks collected more than ₹26,170 crore in penalties for failing to maintain the Minimum Average Balance (MAB) in savings accounts between FY2022-23 and FY2025-26, according to government data presented in Parliament. The figures have reignited debate over banking service charges, particularly as financial inclusion initiatives have expanded access to formal banking services across the country.

The data, disclosed by the Ministry of Finance in response to a parliamentary question, covers penalties imposed by public sector banks (PSBs), private sector banks, and foreign banks. While several banks have removed minimum balance requirements for certain account categories, many continue to levy charges on regular savings accounts where customers fail to maintain the prescribed balance.

Banks Collected Over ₹26,170 Crore in MAB Penalties

According to the Finance Ministry, Indian banks collectively recovered more than ₹26,170 crore through minimum balance penalty charges during the four financial years from FY2022-23 to FY2025-26.

The penalties apply when customers fail to maintain the minimum average monthly balance specified for their savings accounts.

Penalty Collection Snapshot

Item	Details
Reporting Period	FY2022-23 to FY2025-26
Total Minimum Balance Penalties	Over ₹26,170 crore
Institutions Covered	Public sector, private sector, and foreign banks
Basis of Charge	Non-maintenance of Minimum Average Balance (MAB)

What Is a Minimum Average Balance?

Most traditional savings accounts require customers to maintain a specified average balance during a month.

If the balance falls below the prescribed threshold, banks may levy:

• Monthly non-maintenance charges.
• Applicable GST on penalty charges.
• Other related service fees depending on account type.

However, several categories of accounts—including Basic Savings Bank Deposit Accounts (BSBDAs) and many Pradhan Mantri Jan Dhan Yojana (PMJDY) accounts—are exempt from minimum balance requirements.

Why Banks Levy Minimum Balance Charges

Banks generally argue that minimum balance requirements help recover the operational costs associated with maintaining savings accounts.

According to industry practice, the charges are intended to:

• Cover account servicing costs.
• Encourage customers to maintain active balances.
• Support branch and digital banking infrastructure.
• Differentiate premium and basic account offerings.

Banks are required to disclose these charges transparently and notify customers about applicable penalties through their schedule of charges.

Accounts Typically Exempt

Account Type	Minimum Balance Requirement
Basic Savings Bank Deposit Account (BSBDA)	No
Most PMJDY Accounts	No
Regular Savings Accounts	Usually Yes (varies by bank)
Premium Savings Accounts	Yes (higher thresholds may apply)

Financial Inclusion Versus Service Charges

The disclosure has renewed discussions about balancing financial inclusion with banking economics.

Consumer groups argue that:

• Penalties disproportionately affect low-income customers.
• Frequent charges reduce savings for vulnerable households.
• Customers are often unaware of varying minimum balance requirements.

Banks, meanwhile, maintain that minimum balance policies are part of their commercial pricing structure and vary depending on account type, location, and banking services offered.

Growing Shift Toward Zero-Balance Accounts

In recent years, many banks have introduced zero-balance products to support financial inclusion and attract new customers.

These include:

• Basic savings accounts.
• Salary accounts.
• Student accounts.
• Government-sponsored financial inclusion schemes.
• Select digital savings accounts.

The expansion of such products has reduced the number of customers subject to minimum balance penalties, although regular savings accounts continue to account for a significant share of banking relationships.

Looking Ahead

The disclosure that Indian banks collected more than ₹26,170 crore in minimum balance penalties between FY2022-23 and FY2025-26 is likely to intensify discussions around customer charges, financial inclusion, and banking transparency. While banks view minimum balance requirements as a legitimate component of account pricing and cost recovery, consumer advocates continue to argue that such penalties disproportionately affect customers with lower incomes and irregular cash flows.

Looking ahead, policymakers and regulators may continue encouraging banks to expand zero-balance account offerings while ensuring greater transparency around service charges. As digital banking adoption grows and competition intensifies, more lenders could revisit their minimum balance policies to improve customer acquisition and retention while balancing operational sustainability.