HDFC Bank, Axis Bank and PNB collected highest minimum balance charges in three financial years, Parliamentary data revealed

Private Banks Lead in Penalty Collections

Recent data tabled in Parliament by the Finance Ministry has thrown light on the substantial fees Indian banks have levied for not maintaining minimum average balance in savings accounts.

Over the financial years 2023 to 2025, private banks raked in around Rs 11,000 crore from these penalties, surpassing public sector banks which collected approximately Rs 8,000 crore in the same period.

This marks a significant shift, as private lenders like HDFC Bank, Axis Bank, and others have enforced stricter rules, leading to higher collections.

HDFC Bank emerged as the frontrunner, gathering over Rs 3,800 crore, while Axis Bank followed closely with more than Rs 2,700 crore.

ICICI Bank also contributed notably with over Rs 1,200 crore.

Public sector banks, despite their larger customer base, fell behind, highlighting differences in policy enforcement across the banking sector.

Understanding Minimum Balance Requirements

Minimum average balance, or MAB, refers to the average amount customers must keep in their savings accounts each month to avoid penalties.

Private banks typically demand higher thresholds, especially in urban and metro areas.

For HDFC Bank, this stands at Rs 10,000 for metro and urban branches, dropping to Rs 5,000 in semi-urban areas and Rs 2,500 in rural ones.

Customers can sometimes opt for fixed deposits as alternatives, like Rs 1 lakh for urban accounts or scaled-down amounts elsewhere.

Penalties are often calculated at 6% of the shortfall or a fixed amount like Rs 600, whichever is lower.

Axis Bank mirrors this with Rs 10,000 MAB requirements in various locations, charging 6% of the deficit or Rs 300 in semi-urban areas.

Public banks like Punjab National Bank have also been noted for high collections, though specifics vary, reflecting a mix of enforcement strategies that impact everyday savers.

These rules aim to ensure account activity but have sparked debates on accessibility for lower-income groups.

Implications for Customers and Banking Sector

The revelations have ignited discussions on banking fairness and customer costs.

For public sector banks, these charges made up just 0.23% of total income, suggesting they are not a major revenue driver but still add up significantly.

Private banks' aggressive approach underscores their business model, prioritizing operational efficiency.

"These penalties, while a small fraction of overall earnings, place an undue burden on middle-class families struggling to meet urban balance requirements amid rising living costs," said a banking analyst familiar with the data.

Comparisons show variations: SBI offers zero balance accounts, contrasting sharply with private peers demanding Rs 10,000 to Rs 15,000 in cities.

ICICI Bank recently adjusted its rules to Rs 15,000 for urban areas after public outcry, down from higher earlier proposals.

This data prompts questions about regulatory oversight and whether such fees truly benefit account holders or merely pad bank profits.

Customers are advised to review their bank's policies and consider zero-balance options where available to sidestep these charges.

In summary, HDFC Bank, Axis Bank, and PNB led in minimum balance penalties over FY23-FY25, with private banks collecting more than public ones overall. This highlights ongoing tensions between bank policies and customer affordability in India's evolving financial landscape.