Chidambaram hails minimum balance waiver by leading banks: ‘Some earned hundreds of crores per year’

Former Finance Minister P Chidambaram hailed the waiver of minimum balance rules by leading banks on Thursday — calling it an “obnoxious rule” that her persisted despite requests from customers. He also alleged that some Indian banks had earned ‘hundreds of crores’ annually from these penalties and turned a deaf ear to calls for a change. Several major Indian banks have waived their minimum balance requirements in recent years amid growing backlash — beginning with the State Bank of India in 2020.

“In the last few years, savings account holders have complained to banks against the government-introduced rule of ‘minimum balance’ in the account, and pleaded for waiver of the rule It was a reasonable request, but banks turned a deaf ear If a customer failed to maintain a minimum balance, he/she was slapped with a penalty Some banks earned hundreds of crores of rupees a year under this obnoxious rule,” he wrote on X.

Chidambaram said that that some banks had “earned hundreds of crores of rupees a year” under this policy. It had also prompted customers to seek alternatives — looking beyond banks for other avenues to place their savings

“Banks have caved in. At least five banks have waived the minimum balance requirement What reason could not do, economics has achieved! Hurrah!” he exulted.

Which banks have waived minimum balance requirements?

Indian Bank introduced a minimum balance waiver for all account holders on Monday in a bid to make banking more accessible and affordable. The move came a week after Punjab National Bank and Bank of Baroda announced that they would be removing the penalty charge for not maintaining a minimum average balance from July 1. Canara Bank had also introduced a similar policy last month — becoming the first PSU bank to waive the minimum balance rule. Prior to these recent changes, State Bank of India had waived the minimum balance requirement amid the COVID-19 pandemic in 2020.

How does the minimum balance rule for savings accounts in India work?

The minimum balance rule has long been implemented by individual banks — using regulatory framework and guidelines from the Reserve Bank of India. Each savings account holder was required to maintain an average monthly balance in their account under the policy. The banks would consequently levy a penalty if the funds fell below the required threshold at any point, with amounts varying based on the type of savings account.