₹8500 Crore Collected as Minimum Balance Penalty: Impact on Common People
Over the last five years (FY20 to FY24), public sector banks (PSBs) in India collected a massive ₹8500 crore as penalties from customers who failed to maintain minimum balances in their savings accounts. This means banks earned about ₹1,699 crore annually just from these fines.
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Why Do Banks Impose These Penalties?
The Reserve Bank of India (RBI) allows banks to charge customers if they don’t maintain the required minimum balance. Each bank sets these charges according to its policies. These penalties are usually a fixed percentage of the shortfall between the required and actual balance. However, Jan Dhan accounts and basic savings accounts are exempt from these charges.
Steady Rise in Penalty Collections
Government data shows a consistent rise in the money banks collect from these penalties:
- FY20: ₹1,738 crore
- FY21: ₹1,142 crore
- FY22: ₹1,429 crore
- FY23: ₹1,855 crore
- FY24: ₹2,331 crore
Despite this growing trend, the State Bank of India (SBI), India’s largest bank, stopped charging minimum balance penalties after FY20. The decision came after reports showed that SBI was earning a significant portion of its profits from these penalties.
Which Banks Collect the Most?
Since SBI stopped imposing these fines, other PSBs have continued to earn significantly:
- Punjab National Bank (PNB): ₹1,538 crore
- Indian Bank: ₹1,466 crore
- Bank of Baroda: ₹1,251 crore
- Canara Bank: ₹1,158 crore
Political Reactions and Public Backlash
Many politicians and activists criticize these penalties for burdening the common man. Congress leader Rahul Gandhi has called out the government for waiving off ₹16 lakh crore in corporate debt while collecting ₹8500 crore from poor and middle-class account holders. He compared this system to a ‘chakravyuha,’ a financial trap for ordinary citizens.
Government Priorities in Question
The recent budget allocated ₹1,441 crore to promote UPI payments and RuPay transactions. However, this amount is lower than what banks collect yearly as minimum balance penalties. This raises concerns about whether the government prioritizes financial inclusion.
Banking Policies Have Changed Over Time
Earlier, banks covered their costs through interest earnings rather than service fees. However, after liberalization, private banks introduced minimum balance charges, and most banks later followed the same model.
As this issue gains attention, more people are questioning whether these penalties are fair or just another way to profit from ordinary citizens.
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