Finance Ministry Data Shows HDFC Bank and Axis Bank Led Minimum Balance Charges, While Most Public Sector Banks Have Waived Penalties on Savings Accounts

New Delhi | July 29, 2026

Indian banks collected ₹7,086.63 crore from customers during FY26 through penalties imposed for non-maintenance of the Minimum Average Balance (MAB) in savings and current accounts, according to information tabled in Parliament by the Finance Ministry.

The data, shared by Minister of State for Finance Pankaj Chaudhary in a written reply in the Rajya Sabha, reveals that private sector banks collected nearly 70% of the total amount, highlighting the growing contribution of fee-based income to their overall earnings.

While most public sector banks (PSBs) have gradually phased out penalties on savings accounts to promote financial inclusion, private banks continue to levy such charges under board-approved policies and Reserve Bank of India (RBI) guidelines.

The government also reiterated that Basic Savings Bank Deposit Accounts (BSBDAs) and Pradhan Mantri Jan Dhan Yojana (PMJDY) accounts remain completely exempt from minimum balance requirements.

Private Banks Collected Nearly ₹5,000 Crore

The Finance Ministry's data shows that private lenders remained the largest contributors to minimum balance penalty collections.

Minimum Balance Charges Collected in FY26

The figures indicate that private banks generated more than twice the fee income collected by public sector banks from minimum balance charges during the financial year.

HDFC Bank and Axis Bank Accounted for More Than Half of Private Bank Collections

Among private sector lenders, HDFC Bank collected the highest amount from minimum balance penalties during FY26.

Top Private Banks by Minimum Balance Charges

Together, HDFC Bank and Axis Bank collected nearly ₹2,880 crore, accounting for almost 58% of all minimum balance charges collected by private sector banks during FY26.

The Reserve Bank of India clarified that comparable data for private banks before FY23 is not maintained, while FY26 figures remain provisional.

Most Public Sector Banks Have Eliminated Savings Account Penalties

The government informed Parliament that 10 of India's 12 public sector banks have already discontinued penalties for failing to maintain the minimum average balance in savings accounts.

The remaining two banks continue to levy such charges, but the penalties have been rationalised based on:

• Board-approved policies

• Commercial considerations

• RBI regulations

• Customer service objectives

This reflects the government's ongoing efforts to improve financial inclusion and reduce banking costs for retail customers.

SBI Recorded the Highest Collection Among PSBs

Among government-owned banks, State Bank of India (SBI) reported the highest collection.

Top Public Sector Banks

However, the Finance Ministry clarified that SBI's collections were only from current accounts, as the bank abolished minimum balance penalties for savings accounts in March 2020.

This distinction highlights the different treatment of savings and current account customers under the bank's policy.

Why Do Banks Levy Minimum Balance Charges?

Banks require customers to maintain a prescribed Minimum Average Balance (MAB) in certain savings and current accounts.

Failure to maintain this balance may result in service charges that vary depending on:

• Type of account

• Customer category

• Branch location

• Bank's internal policy

• Monthly average balance maintained

According to the Finance Ministry, such charges are intended to cover part of the operational costs associated with maintaining banking services.

RBI Guidelines on Minimum Balance Charges

The Reserve Bank of India allows banks to levy penalties for non-maintenance of minimum balance, provided they comply with regulatory guidelines.

Banks Must Ensure That Charges Are

• Reasonable

• Transparent

• Board-approved

• Linked to the cost of providing banking services

• Clearly disclosed to customers

Banks are also required to notify customers before imposing penalties.

Customers Must Be Informed Through

• SMS alerts

• Email notifications

• Letters

• Mobile banking notifications

• Other approved communication channels

Customers are generally provided adequate time to restore the required balance before any penalty is deducted.

Zero-Balance Accounts Continue to Enjoy Full Exemption

The government reiterated that Basic Savings Bank Deposit Accounts (BSBDAs), including Pradhan Mantri Jan Dhan Yojana (PMJDY) accounts, are not subject to minimum balance requirements.

These accounts allow customers to access essential banking services without worrying about penalties.

Benefits Available Under BSBDA

• Zero minimum balance requirement

• No penalty for low balance

• Free deposits and withdrawals

• ATM/Debit card facility

• Basic banking services

• Financial inclusion support

According to the government, nearly 73 crore BSBDAs, including Jan Dhan accounts, currently remain exempt from minimum balance penalties.

Fee-Based Income Remains an Important Revenue Source

Apart from interest income, banks generate substantial earnings through service charges.

These include:

• Minimum balance penalties

• ATM transaction charges

• Debit card fees

• Cheque bounce charges

• Locker rentals

• SMS alert fees

• Account maintenance charges

• Foreign transaction charges

For private banks, fee income has become an important contributor to overall profitability, helping diversify revenue beyond traditional lending activities.

PSBs Continue to Strengthen Financial Performance

In a separate reply to Parliament, the Finance Ministry highlighted the improving financial condition of public sector banks.

According to the government:

• Gross Non-Performing Assets (GNPAs) have fallen to multi-decade lows.

• PSBs have reported record profits.

• Credit growth remains healthy across sectors.

• Balance sheets have strengthened significantly.

• Capital adequacy has improved.

The government attributed the improvement to stronger recoveries, better underwriting standards and continued economic growth.

Government Launches ECLGS 5.0

The Finance Ministry also highlighted the launch of Emergency Credit Line Guarantee Scheme (ECLGS) 5.0, introduced in May 2026 to support businesses affected by disruptions arising from the West Asia crisis.

Key Features of ECLGS 5.0

The scheme is aimed at ensuring uninterrupted credit flow to businesses facing temporary liquidity stress caused by geopolitical developments.

How Customers Can Avoid Minimum Balance Penalties

Customers can minimise banking charges by understanding their account requirements.

Practical Tips

• Maintain the prescribed monthly average balance.

• Choose a zero-balance account if eligible.

• Monitor account balances regularly.

• Activate SMS and email alerts.

• Review the bank's schedule of charges periodically.

• Contact the bank before changing account usage patterns.

Being aware of account conditions can help customers avoid avoidable deductions and better manage personal finances.

Key Takeaways

Implications for Customers and the Banking Sector

The latest data underscores the differing approaches adopted by private and public sector banks towards minimum balance policies. While private lenders continue to rely on service charges as an important source of fee income, most public sector banks have moved towards customer-friendly policies by eliminating penalties on savings accounts. As digital banking expands and financial inclusion initiatives gather pace, banks may increasingly focus on balancing customer convenience with sustainable fee-based revenue models.

Market Outlook

The Finance Ministry's data highlights the continued significance of non-interest income for India's banking industry, particularly among private lenders. Going forward, investors will monitor whether banks modify their fee structures amid rising competition, greater digital adoption and evolving regulatory expectations. The sector's earnings outlook will continue to depend on a combination of credit growth, asset quality, interest margins and the ability to generate stable fee income while maintaining customer satisfaction.