HDFC Bank, ICICI Bank and Axis Bank earned more than all 21 PSBs together between FY15 and FY17
The three largest private banks — HDFC Bank, ICICI Bank and Axis Bank — earned more than all 21 of their state-owned peers put together from penalties levied for non-maintenance of minimum balance in savings accounts between FY15 and FY17. According to data put out by the ministry of finance in response to a Rajya Sabha question, the scales tipped only in FY18, when State Bank of India (SBI) imposed a levy on non-maintenance of minimum balance. The three private lenders together collected Rs 1,031.85 crore in FY15, Rs 945.07 crore in FY16, Rs 1,008.79 crore in FY17 and Rs 783.98 crore in the nine months ended December 2017 as penalties for shortfall in account balances. For public-sector banks (PSBs), the figures were Rs 687.57 crore, Rs 801.07 crore, Rs 203.78 crore and Rs 2,533.72 crore, respectively. SBI alone collected Rs 1,982 crore between April 2017 and December 2017.
According to Reserve Bank of India (RBI) guidelines, banks do not have any minimum balance requirement for basic savings bank deposit (BSBD) accounts. For other savings accounts, banks are allowed to decide the policy on levy of charges on non-maintenance of minimum balances with the approval of their boards. In April 2017, SBI reintroduced the average monthly balance (AMB) that it had done away with in 2012. Outgoing chairman Arundhati Bhattacharya had in October defended the imposition of the penalty saying the charges would cross-subsidise financial-inclusion accounts opened by the bank.
“Except SBI, all the banks were charging for non-maintenance of minimum average balance,” she had said, adding, “Because there were certain number of accounts that we were supporting without any charges, it was necessary. Overall if there is need for improving or increasing charges it will be done.” Earlier this month, SBI announced an up to 75% reduction in charges applicable on non-maintenance of average monthly balance in savings accounts. Effective April 1, SBI customers will have to pay between Rs 5 and Rs 15, exclusive of goods and services tax (GST), depending on their location and the quantum of the shortfall. At present, the charges range between Rs 20 and Rs 50.
The data put out by the ministry confirms a widely-held view that private banks make more money from penalties than PSBs do. HDFC Bank has an average quarterly balance (AQB) requirement of Rs 2,500 for regular savings accounts with rural branches, an AMB of Rs 5,000 for semi-urban branches and Rs 10,000 for those in urban branches. Penalty amounts range between Rs 150 and Rs 600. ICICI Bank’s MAB ranges between Rs 1,000 and Rs 10,000, while penalty amounts can be anywhere between 5% of the shortfall and Rs 100 plus 5% of the shortfall. Axis Bank charges what it calls a ‘monthly service fee’ (MSF) of Rs 10 for every Rs 100 shortfall in required balance or Rs 500, whichever is lower, with a minimum charge of `100 for its Easy Access Savings Accounts.