Private Banks Lead ₹4,818 Crore Minimum Balance Penalty Collections in FY25

Indian Banks reportedly collected ₹4,818 crore in FY2024-25 from customers who did not maintain the required Minimum Average Balance (MAB) in their savings and current accounts. The data was cited in the 4th report of the Committee on Petitions, chaired by MP Chandra Prakash Joshi, and tabled in the Lok Sabha, as per The Print report.  

The report noted that such charges continue to form a stream of fee income for banks. Over the past 5 financial years, lenders together have collected ₹28,495 crore through minimum balance penalties. 

Private Banks Contribute the Larger Share 

Private sector banks accounted for ₹2,772.2 crore of the total amount collected in FY25. Public sector banks brought in ₹2,045.7 crore, marking an 8% decline from the previous year. 

Within the private banking segment, HDFC Bank made up nearly 40% of the collections. Axis Bank accounted for around 25%, while ICICI Bank contributed about 8.4%. 

Gap Between Interest and Penalties 

The committee noted that customers who maintain the prescribed balance usually earn savings account interest of about 2.5% to 4% a year. Some banks offer rates as high as 6% to 7%. 

However, the penalty for falling short of the minimum balance can be 15 to 20 times the interest that would have been earned. The report stated that this gap affects customers with uneven or low cash flows. 

Suggestions from the Committee 

The panel proposed that banks consider alternatives to standard penalties. One suggestion was to treat the shortfall as a temporary loan and recover only reasonable interest for the period. 

It also recommended placing a cap on lifetime penalties so that total charges do not exceed the prescribed minimum balance. Another proposal was to block the minimum balance amount instead of charging recurring penalties. 

Regulatory Framework 

The Department of Financial Services informed the committee that RBI circulars issued in 2014 and 2015 permit banks to levy such charges under board-approved policies. 

Read More: RBI to Overhaul Lead Bank Scheme for Enhanced Effectiveness! 

Conclusion 

The report sets out the scale of collections from minimum balance penalties and outlines possible changes to how such charges may be applied in future. 

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