A Parliamentary committee has recommended that all banks stop levying penalties on customers for not maintaining minimum balance in savings accounts, after public and private sector banks collected ₹4,817.96 crore in fines during 2024-25.
The Lok Sabha Petitions Committee urged the Reserve Bank of India (RBI) and the Department of Financial Services to consider issuing uniform guidelines to end such penalties across banks, including cooperative banks and regional rural banks.
Complaint highlights financial stress
The recommendation followed a complaint filed by Bengaluru-based entrepreneur Parameswaran Krishna Iyer, who argued that minimum balance penalties are disproportionately high and place undue financial stress on economically weaker sections.
The committee cited instances where a bank deducted ₹440 from a ₹500 MGNREGA wage deposit in Bihar and another deducted ₹2,500 from ₹5,000 deposited in a child’s account due to minimum balance rules.
According to data submitted to the panel, public sector banks collected ₹2,045.21 crore while private banks collected ₹2,772.21 crore as penalties in 2024-25.
Incentives over penalties
Instead of penalising customers, the committee suggested that banks encourage higher balances through incentives such as reward points, fee waivers and better interest rates for consistent deposits.
The panel noted that while the RBI has permitted banks to levy such penalties, no specific direction mandates it. It also observed that most public sector banks have already waived these charges, while private banks continue to impose them.
Banks such as State Bank of India, Bank of Baroda, Canara Bank, Punjab National Bank and Union Bank have withdrawn such penalties, while a few others are still reviewing the matter.
The committee emphasised the need for a uniform policy that balances bank autonomy with customer protection, particularly for vulnerable account holders.