Indian banks collected approximately ₹4,818 crore during FY2024–25 from customers who failed to maintain the stipulated Minimum Average Balance (MAB) in savings and current accounts. The figures were highlighted in the Fourth Report of the Committee on Petitions, chaired by MP Chandra Prakash Joshi, and tabled in the Lok Sabha.

Over the past five financial years, banks have collectively earned ₹28,495 crore through minimum balance-related charges, underlining the significance of such penalties as a recurring fee-income stream.

Private Banks Dominate Collections

Private sector lenders contributed the larger share of total collections in FY25, accounting for ₹2,772.2 crore. Public sector banks collected ₹2,045.7 crore, reflecting an approximate 8% decline compared to the previous year.

Among private lenders:

• HDFC Bank contributed nearly 40% of total private sector collections
• Axis Bank accounted for roughly 25%
• ICICI Bank contributed about 8.4%

The data indicates that larger private banks form a substantial portion of minimum balance penalty revenues.

Disparity Between Earned Interest and Penalties

The committee observed a significant gap between savings account interest earnings and penalty charges.

Customers maintaining the required balance typically earn 2.5% to 4% annual interest, with select banks offering rates up to 6%–7%. However, penalties imposed for falling short of the minimum balance can be 15 to 20 times higher than the interest that would have been earned, disproportionately impacting customers with irregular income flows or lower account balances.

Committee’s Recommendations

To address concerns around fairness and customer impact, the committee proposed several alternatives:

• Treating shortfalls as temporary overdrafts and charging reasonable interest instead of flat penalties
• Introducing a lifetime cap on total penalties, ensuring charges do not exceed the prescribed minimum balance requirement
• Blocking or earmarking the minimum balance amount rather than levying repeated penalties

These measures aim to balance revenue considerations with customer protection.

Regulatory Context

The Department of Financial Services informed the panel that the penalty framework is permitted under circulars issued by the Reserve Bank of India in 2014 and 2015. Banks are allowed to levy such charges under board-approved policies, subject to regulatory oversight.

Summary

Indian banks collected ₹4,818 crore in FY25 from minimum balance penalties, with private sector lenders contributing the majority share. Over five years, total collections have reached ₹28,495 crore. The parliamentary committee flagged the wide gap between earned interest and penalties, recommending alternative approaches such as reasonable interest recovery, caps on lifetime penalties, and revised structuring to reduce customer burden while maintaining regulatory compliance.

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