Minimum balance penalties touch Rs 8,621 crore in five years, panel urges abolition

Nationalised banks have collected Rs 8,621.12 crore between 2020-21 and 2024-25 from customers for not maintaining the minimum balance, with Uttar Pradesh, Tamil Nadu and Maharashtra topping the collection charts, while the parliamentary panel has urged banks to do away with the penalties.

In the case of the State Bank of India (SBI), which had withdrawn the penalty on savings bank accounts in March 2020, penalties still increased from Rs 1,148.71 crore in 2020-21 to Rs 1,415.65 crore, Rs 1,785.90 crore and Rs 2,225.10 crore in the next three fiscals. This figure decreased in 2024-25, with penalties estimated at around Rs 2,045.74 crore.

Data placed before the Lok Sabha Committee of Petitions, as reported by Deccan Herald, shows that the levy of penalties by public sector banks rose steadily between 2020-21 and 2023-24 before witnessing a marginal decline in 2024-25, even as concerns were flagged about the burden on small account holders.

The panel has expressed the view that penal charges for non-maintenance of minimum balance disproportionately affect vulnerable sections, and it has recommended that banks reconsider the practice altogether.

State-wise figures indicate that Uttar Pradesh recorded the highest cumulative penalty collection at Rs 1,233.97 crore over the five financial years, followed by Tamil Nadu at Rs 1,121.38 crore and Maharashtra at Rs 1,088.18 crore, while Karnataka and Bihar accounted for Rs 529.20 crore and Rs 464.53 crore, respectively. Although the overall national trend showed a dip in 2024-25 compared to the previous fiscal, six states and three Union Territories registered an increase in collections during the same period, reflecting uneven regional patterns.

Tamil Nadu reported the sharpest rise in 2024-25, with collections increasing by Rs 43.22 crore from Rs 233.12 crore in 2023-24 to Rs 276.34 crore, whereas Uttar Pradesh recorded the steepest decline of Rs 51.84 crore, with collections falling from Rs 339.10 crore to Rs 287.87 crore. Southern states, barring Karnataka, also saw higher collections in the latest fiscal despite the broader national moderation.

The Parliamentary panel has maintained that the decision of certain banks to waive penalties on savings accounts is in the best interest of stakeholders, and it has further suggested that both public and private sector lenders adopt a sympathetic approach towards micro-entrepreneurs, the self-employed and small traders who operate current accounts, instead of subjecting them to repeated penal charges for non-maintenance of minimum balance.