Indian Bank, PNB, and Other PSBs Collected ₹8,936 Crore in Penalties for Minimum Balance Violations Over 5 Years

In a recent disclosure, it has come to light that 11 public sector banks in India have collected ₹8,936 crore in penalties from customers over a 5-year period for failing to maintain the prescribed minimum balance in their savings accounts.

Penalty Collection Dominated by Indian Bank, PNB and Bank of Baroda

Between FY21 and FY25, Indian Bank led collections with ₹1,828 crore, followed by Punjab National Bank (PNB) at ₹1,662 crore, and Bank of Baroda exceeding ₹1,500 crore. The remaining banks collectively contributed to the balance, raising concerns about the burden on common account holders. 

These penalties were implemented under RBI rules that allow banks to charge reasonable fees for services, including non-maintenance charges, provided transparency is maintained.

Public Sector Banks in India have recorded a significant 34% increase over the past 5 years in charges levied on customers for failing to maintain the stipulated minimum balance in their accounts.

Penalty Framework and Impact on Account Holders

The Reserve Bank of India permits banks to set their own minimum balance rules but insists they do so with transparency and fairness. It has also instructed banks not to let accounts dip into negative solely due to penalties. However, issues have arisen where penalties have affected low-income individuals, particularly those in rural areas, with deductions sometimes eating into welfare deposits meant for beneficiaries.

Read More: NSE Pays ₹40 Crore to SEBI to Settle Data Disclosure Case!

Policy Reforms: Waiving Penalties to Facilitate Inclusion

In a customer-friendly move, banks including SBI, Canara Bank, Bank of India, and Central Bank of India have removed minimum balance penalties. SBI had led the way by eliminating such charges in March 2020. Others followed suit more recently, reflecting a trend towards more equitable banking services that prioritise financial inclusion.

Conclusion

The ₹8,936 crore penalty collection spotlighted practices that disproportionately impacted vulnerable customers. The subsequent policy shift by major public sector banks indicates a welcome change, offering millions of savings account holders a more accessible and less punitive banking experience.

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