Public sector banks, major private banks collected over ₹21,000 cr for not maintaining minimum balance in accounts

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Public Sector Banks and 5 major private sector banks collected over ₹35,000 crore in charges since 2018 on account of non-maintenance of minimum balance, additional ATM transactions and SMS Services, Finance Ministry informed the Rajya Sabha.

Data submitted as part of a written response by Minister of State in the Finance Ministry, Dr Bhagwat Karad, showed that public sector banks and five major private sector banks (Axis Bank, HDFC Bank, IndusInd Bank, ICICI Bank and IDBI Bank) collected over ₹21,000 crore on account of non-maintenance of minimum balance, while over ₹8,000 crore was collected for transactions through ATM beyond free numbers and SMS charges gave over ₹6,000 crore.

Banks’ charges

Banks levy charges for non-maintainance of minimum balance in an account, use of ATMs beyond free transactions, depositing cash beyond a limit, among others. Of these, maintaining minimum balance (better known as monthly average balance – MAB or average monthly balance – AMB) is the amount a customer is required to maintain in his/her account every month. This varies from metro to small cities and to rural areas. The figure is calculated at the end of each month and failure to maintain this balance results in penalties.

For various banks, AMB ranges between ₹3,000 to ₹10,000 in metros, ₹2,000-₹5,000 in urban areas and ₹500-₹1,000 in rural areas. Non-maintenance could lead to levy of charges ranging between ₹400-₹500. Some private banks also levy cash transaction charges for such accounts of ₹100-125 per transaction over and above the non–maintenance of AMB charges.

Source of power

According to Karad, a RBI circular permits banks to fix penal charges regarding non-maintenance of minimum balance in savings account, as per their Board approved policy, while ensuring that all such charges are reasonable and not out of line with the average cost of providing the services. Further, RBI advised banks “to ensure reasonableness and equity in the charges levied by banks for sending SMS alerts to customers and to leverage the technology available with them and the telecom service providers to ensure that such charges are levied on all customers on actual usage basis,” he said.

Talking about charges for additional ATM transaction, Karad said that bank customers are eligible for five free transactions (inclusive of financial and non-financial transactions) every month from their own bank ATMs. They are also eligible for fixed number of free transactions (inclusive of financial and non-financial transactions) from other bank ATMs viz. three transactions in metro centres and five transactions in non-metro centres. Beyond the free transactions, charges are levied for each ATM transactions and the ceiling/cap on customer charges is ₹21 per transaction, with effect from January 01, 2022.

However, there is no requirement for maintaining minimum balance in the accounts opened under Pradhan Mantri Jan Dhan Yojna and for Basic Savings Bank Deposit Account. At the same time, for these accounts, there is no no limit on number and value of deposits that can be made in a month. However, withdrawal, including ATM ones, are limited to four in a month.