Despite the State Bank of India, the country’s leading lender, deciding not to impose penalties for maintaining minimum balances in accounts after FY20, Public Sector Banks (PSBs) have seen a significant rise in penalty collections. Over the past five years, PSBs have increased their penalty collections by more than 34 percent, accumulating approximately ₹8,500 crore.
Collection Mechanisms by Public Sector Banks
According to data provided by Minister of State (Finance) Pankaj Chaudhary in response to a Lok Sabha query, 11 PSBs are involved in collecting penalties for not maintaining the required minimum balance. SBI has waived off minimum balance charges. Banks such as Punjab National Bank, Bank of Baroda, Bank of India, Punjab & Sind Bank, Union Bank of India, and UCO Bank enforce penalties based on the Quarterly Average Balance (QAB). In contrast, Indian Bank, Canara Bank, Bank of Maharashtra, and Central Bank of India impose penalties based on the Average Monthly Balance (AMB).
Penalty Structures for Savings Accounts
The penalty structures vary across different PSBs and account types. For example, Punjab National Bank mandates a minimum QAB of ₹2,000 in urban and metro areas, ₹1,000 in semi-urban areas, and ₹500 in rural areas. Failure to maintain these balances can result in penalties ranging from ₹100 to ₹250, depending on the location.
For current accounts, the minimum QABs required are ₹1,000 in rural areas, ₹2,000 in semi-urban areas, ₹5,000 in urban areas, and ₹10,000 in metro areas. Penalties for not maintaining these balances range from ₹400 to ₹600, again depending on the geographic area.
Penalty Structures for Canara Bank
Canara Bank’s website details the AMB requirements for savings accounts, which are ₹2,000 in urban and metro areas, ₹1,000 in semi-urban areas, and ₹500 in rural areas. Penalties for shortfalls range from ₹25 to ₹45, plus GST, depending on the amount of shortfall. For current accounts, the AMB requirements are ₹1,000 in rural areas, ₹2,000 in semi-urban areas, ₹5,000 in urban areas, and ₹7,500 in metro areas. Penalties for failing to maintain the required balance can be ₹60 per day, up to a maximum of ₹500 per month, plus GST.
Regulatory Recommendations
Chaudhary emphasized that banks are required to inform customers of the minimum balance requirements when opening an account and must notify them of any changes. If the minimum balance is not maintained, banks should inform customers of the applicable penalties and provide a one-month period to rectify the balance before charges are levied. He also stressed that penalties should not lead to a negative balance solely due to these charges
1 comment:
What is wrong ? When lic is charging for late premium, Mobile operators are charging minimum 199 per month, Income tax department is charging delayed payment on tax assessment, Govt is charging for caste, Income, domicile certificate.Banks are maintaining various types of accounts, i.e. SB, CA, CC , Not keeping minimum balance attracts service charges. There should not be any politics in this matter.
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