The Rising Collections of Penalty by Public Sector Banks for Not Maintaining Minimum Balance
Public Sector Banks (PSBs) in India have witnessed a staggering 34% surge in the collection of penalties for not maintaining the minimum balance in accounts over the course of five years, even after the country’s leading lender, State Bank of India, decided to waive off such penalties after the financial year 2020.
As per the data presented in a written response to an un-starred question in the Lok Sabha by the Minister of State (Finance) Pankaj Chaudhary, PSBs amassed approximately ₹8,500 crore from this source in the last five years starting from FY20.
Among the 11 PSBs, Punjab National Bank, Bank of Baroda, Bank of India, Punjab & Sind Bank, Union Bank of India, and UCO Bank are known to impose penalties for not upholding the minimum Quarterly Average Balance (QAB). Conversely, Indian Bank, Canara Bank, Bank of Maharashtra, and Central Bank of India levy penalties for not maintaining the minimum Average Monthly Balance (AMB).
Diverse Collection Mechanisms
Various PSBs have disparate mechanisms for collecting penalties. For instance, according to the Punjab National Bank’s website, a savings account customer is required to maintain a minimum QAB of ₹2,000, ₹1,000, and ₹500 in urban & metro, semi-urban, and rural areas, correspondingly. Failure to maintain this balance may lead to penalties ranging up to ₹100, ₹150, and ₹250 in the three geographic categories.
On the other hand, Canara Bank mandates that a savings account customer maintain an AMB of ₹2,000 in urban and metro areas, while the requirement in semi-urban and rural areas is ₹1,000 and ₹500, respectively. Customers failing to meet these criteria may have to pay penalties ranging between ₹25 and ₹45, together with GST based on the shortfall amount.
With respect to current accounts, the discrepancies persist, with penalties of ₹60 per day, subject to a maximum of ₹500 in a month, being enforced in the case of shortfall along with GST, as per Canara Bank’s regulations.
In the midst of these developments, Minister Chaudhary emphasized the importance of banks engaging in transparent communication with customers. He underscored the necessity for banks to inform customers about the minimum balance requirement at the time of account opening, as well as any subsequent alterations. Furthermore, should an account fail to maintain the minimum balance, the bank is required to notify the customer of the applicable penal charges, which should be rectified within one month. Chaudhary stressed that it is imperative to ensure that a savings account does not plunge into a negative balance solely due to charges imposed for non-maintenance of the minimum balance.
This rise in penalty collections by PSBs has sparked conversations about the impact on customers, particularly those in rural and semi-urban areas who may find it challenging to meet the prescribed minimum balance requirements. As the debate continues, it remains to be seen whether further regulatory measures will be introduced to address this growing concern.
