Banks collected over Rs 7,000 crore in FY26 for minimum balance shortfalls

Record penalties for minimum balance violations

Indian banks collected over Rs 7,000 crore in penalties from account holders for failing to maintain the minimum average balance in FY26. This marks a continued rise in penalty collections, which have been a growing source of fee income for lenders.

Private sector banks accounted for the lion's share of these charges. They collected Rs 4,949 crore, more than double the Rs 2,138 crore collected by all 12 public sector banks combined.

Private banks lead the charge

HDFC Bank, Axis Bank, and ICICI Bank alone collected more in penalties than all PSBs put together. These three private lenders have historically maintained higher minimum balance requirements and stricter enforcement.

Public sector banks, which often have lower minimum balance thresholds and more lenient policies, still managed to collect Rs 2,138 crore. The gap between private and public banks has widened significantly over the past few years.

Four-year penalty trend

Data shows that banks have pocketed a staggering Rs 26,100 crore in minimum balance penalties over the last four financial years. This includes charges for shortfalls that sometimes amount to just a few hundred rupees.

Customers are often penalised monthly if the balance falls below the stipulated minimum. Many account holders are unaware of the exact charges or the calculation method, leading to unexpected deductions.

Consumer impact and regulatory concerns

The rising penalty collections have drawn criticism from consumer rights groups. They argue that banks are relying on fee income to boost profitability, often at the expense of lower-income account holders.

Some public sector banks have reduced penalties or offered basic savings accounts with no minimum balance requirement. However, private banks have largely maintained their policies, citing the cost of maintaining accounts.

RBI has previously advised banks to be transparent about charges. But no major regulatory action has been taken to cap or standardise minimum balance penalties across the banking system.

What happens next

With penalty collections crossing Rs 7,000 crore in a single year, the debate over fair banking practices is likely to intensify. Consumer groups may push for stricter RBI guidelines, while banks argue that charges are disclosed upfront. The coming months could see renewed calls for a uniform policy on minimum balance requirements.