Govt Banks Rethink Penalty on Minimum Balance Non-Maintenance: In a major shift benefiting millions of customers, several Govt banks in India are reviewing the minimum balance requirement for savings accounts. Canara Bank, Punjab National Bank, Indian Bank, and Bank of Baroda have already stopped charging penalties for not maintaining minimum balances.
Why Are Govt Banks Making This Change Now?
This shift follows consultations with the finance ministry, which questioned the need to penalize savings account holders—especially during a time when banks are seeing reduced growth in CASA (current and savings account) deposits.
A recent report by the Reserve Bank of India (RBI) highlighted that banks are relying more on term deposits and certificates of deposit, which cost them more than CASA accounts.
SBI Led the Way by Scrapping the Rule in 2020
The State Bank of India (SBI) was the first to eliminate the minimum balance requirement for regular savings accounts back in 2020. This followed public backlash after data from an RTI showed the bank collected more in penalties than its annual net profit.
This prompted a major rethinking of similar policies across other public sector banks.
Jan Dhan Accounts Show Why Penalties May Be Unnecessary
Zero-balance Jan Dhan accounts were once considered inactive or low-value. But recent trends show rising balances over time—even without enforcement of a minimum balance. This has convinced policymakers that people do save money without being penalized.
Digital Banking Makes Maintenance Costs Lower
Earlier, banks argued that minimum balances helped cover costs of free banking services like ATM use, cheque books, and passbooks. But with increased digital banking adoption, operating costs have dropped.
Instead of penalizing users, banks are now exploring new revenue streams like debit card fees and charges on exceeding transaction limits.
Private Banks Still Follow Relationship-Based Models
Unlike govt banks, private sector banks continue to enforce minimum balance rules—unless the customer is a salary account holder or qualifies under high net-worth criteria. These customers enjoy relaxed rules if they invest in fixed deposits or mutual funds within the same bank.
A Customer-Friendly Move by Govt Banks
If you have a savings account in a public sector bank, you may soon no longer need to worry about maintaining a minimum balance. This step reflects a broader trend toward customer-friendly banking, especially for those relying on digital services or managing small savings.
Keep an eye on official announcements from your bank and continue using digital tools to manage your account with ease.
