Minimum balance penalties: Banks collect Rs 19,000 crore in 3 years

New Delhi, Mar 18: Banks in India have collected around Rs 19,000 crore over the past three years as penalties for not maintaining minimum account balances, raising concerns about the disproportionate impact on low-income account holders.
The information was provided by the Aam Aadmi Party leader Raghav Chadda in the Parliament.
The penalties are typically levied when account holders fail to maintain the prescribed minimum balance, a requirement that varies across banks and account types. While intended as a service condition, the burden falls most heavily on those with limited financial capacity.
The small account holders, including farmers, pensioners, and daily wage workers, are often the most affected.
“A farmer who withdraws money for urgent needs may fall below the minimum balance and face a penalty. Similarly, pensioners and low-income workers may incur charges simply for accessing their own funds,” the law maker said.
The concern is that such deductions can further strain already limited resources, especially for those maintaining accounts primarily for secure storage of savings rather than active financial transactions.
Chadda argued that banking systems should be designed to encourage participation rather than penalize low balances.
“The purpose of bringing people into the formal banking system is to provide security and accessibility. Penalizing them for low balances may discourage usage,” he said.
Public sentiment has also reflected growing unease, with calls for a review of minimum balance requirements and associated penalties.
He said, “Poor keep money in banks for safety. Sometimes they have to withdraw everything for emergencies, and then they are charged for not having enough left.” [KNT]