The government has clarified that it has not issued any blanket direction to write off penalty charges imposed by banks for not maintaining the minimum balance in savings accounts. However, it said many public sector banks have already reviewed or waived such charges voluntarily in recent years to make banking more customer-friendly.
The clarification came from Finance Minister Nirmala Sitharaman in the Lok Sabha in response to a starred question raised by MPs Suresh Kumar Shetkar and Sougata Ray on excessive charges levied by banks for not maintaining the required minimum balance.
The MPs had sought details about the amount collected by banks and whether the government planned to reverse or write off these charges, particularly for small depositors.
Rs 8,000 crore collected as MAB penalty in three years
The Finance Ministry informed Parliament that public sector banks (PSBs) collected Rs 8,092.83 crore from deposit account holders between FY2022-23 and FY2024-25 as penalties for not maintaining the Minimum Monthly Average Balance (MAB).
These charges were collected from savings and current account holders whose balances fell below the minimum requirement.
However, the government said the amount is relatively small compared to the overall income of banks.
“The amount of Rs 8,092.83 crore collected over the last three financial years constitutes approximately 0.23% of the total income of Public Sector Banks during the same period,” Finance Minister Nirmala Sitharaman said in a written reply.
According to the government, this suggests that such charges are largely meant to recover the cost of providing banking services rather than generate revenue through penalties.
Zero-balance accounts not affected
The government also highlighted that a large number of bank accounts in India do not require any minimum balance at all.
These include Basic Savings Bank Deposit Accounts (BSBDAs) and accounts opened under the Pradhan Mantri Jan Dhan Yojana.
These accounts are designed to promote financial inclusion and are fully exempt from minimum balance requirements and penalty charges.
“Approximately 72 crore BSBDAs, including PMJDY accounts, are not subject to any penal charges for non-maintenance of minimum balance,” the Finance Minister said.
Such accounts offer basic banking services including deposits, withdrawals and ATM access without any minimum balance requirement.
Many public sector banks have already waived charges
The government said several PSBs have reviewed their service charge structures in recent years to make banking more inclusive.
For instance, State Bank of India had already waived penal charges for non-maintenance of minimum balance in savings accounts in March 2020.
The ministry further informed Parliament that 9 more public sector banks completely waived these charges in 2025; the remaining two PSBs have rationalised minimum balance charges.
These steps were taken as part of efforts to improve customer centricity and support financial inclusion.
Will the government order refund of such charges?
On whether the government plans to reverse or recredit charges collected from low-income account holders, the Finance Ministry did not indicate any such decision.
Banks are allowed to levy such charges based on their board-approved policies, provided they follow regulatory guidelines.
The Reserve Bank of India requires banks to ensure that service charges are reasonable, transparent and aligned with the cost of providing services.
Any court order to waive such penalties?
The government also clarified that no general court order exists directing banks to waive or refund minimum balance penalties.
According to information shared by the RBI: No general direction has been issued by the Supreme Court or any High Court mandating waiver or refund of such penal charges across banks. The central bank also said it does not maintain information on specific court cases related to such charges.
Banks must warn customers before deducting penalties
The Finance Ministry said banks are required to inform customers if their account balance falls below the required minimum level.
Under RBI guidelines, banks typically notify customers through SMS, email, letters and other communication channels.
Customers are generally given time to restore the minimum balance before the penalty is applied.
Summing up…
The government’s response highlights a key balance between financial inclusion and operational costs of banks. While penalties for low balances remain permissible for regular savings accounts, the expansion of zero-balance accounts such as BSBDAs and Jan Dhan accounts has significantly reduced the risk of such charges for vulnerable customers.
At the same time, the move by several public sector banks to scrap or reduce minimum balance penalties indicates a gradual shift towards more customer-friendly banking practices.