Banks should not charge fees for failing to maintain minimum balance: Parliament panel

The Petitions Committee has recommended that public sector banks (PSBs) and private sector banks (PvSBs) should encourage the accumulation of higher balances through incentives such as reward points, fee waivers and higher interest rates for customers who maintain consistent deposits. | Photo credit: REUTERS/AJAY VERMA

The Petitions Committee has recommended that public sector banks (PSBs) and private sector banks (PvSBs) should encourage the accumulation of higher balances through incentives such as reward points, fee waivers and higher interest rates for customers who maintain consistent deposits.

The panel believes that this positive reinforcement approach is more compatible with financial inclusion.

After carefully evaluating the fine balance between the autonomy given to the banks and the interests of account holders, especially those belonging to the economically vulnerable sections of the society, the Committee suggested that all banks – whether private sector or public sector – should adopt a uniform policy of not imposing penalties for failure to maintain a minimum balance in all regular savings bank accounts.

In this regard, the Department of Financial Services (DFS) and the Reserve Bank of India (RBI) may consider issuing necessary guidelines to all banks, including cooperative banks and regional rural banks (RRBs).

The 15-member committee, chaired by Chandra Prakash Joshi, Member of Parliament (BJP) from Chittorgarh, Rajasthan, underlined that while most PSBs have decided to waive the minimum SB account balance charges, the leading PvSBs have not followed suit. It noted that no directions or guidelines have been issued by the RBI in this regard so far.

Punishment waiver: SBI is at the forefront

The panel highlighted the case of State Bank of India (SBI), the first among the major PSBs to waive charges for failure to maintain minimum balance with effect from March 11, 2020.

In its response to the committee, SBI said, “MAB (monthly average balance) charges have been waived to improve customer service, encourage saving habit among small customers and incentivize customers to stay with SBI.”

Although the above move affected profitability in the short term, it benefited the Bank in the long run by improving customer satisfaction, thereby attracting more customers and potentially increasing overall revenue.

The committee noted that SBI compensated for the loss of revenue due to waiving charges for failure to maintain minimum balance in SB accounts through cost reduction through digital push and migrating customers to digital channels, thereby acquiring more customers and increasing business levels. SBI’s revenue has almost doubled since 2020 and net profit has increased more than three times.

Following the SBI’s lead, most PSBs, including Canara Bank, Punjab National Bank, Bank of India, Union Bank of India, Central Bank of India and Bank of Baroda, have waived charges for not maintaining minimum balances in various savings accounts.

According to the information provided to the committee by the Ministry of Financial Services, the remaining PSBs are also exploring the possibility of doing away with the penalty.

Small entrepreneurs need a tailor-made checking account

The committee suggested that all PSBs and PvSBs could consider the feasibility of offering a tailor-made current account product, especially for use by small business owners. This is to ensure that the capital and savings of the entrepreneurs are not affected by fines and that their involvement with the bank is fruitful for the growth of their business.

It noted that microentrepreneurs, self-employed people and small traders hold checking accounts that typically offer no interest and have higher minimum balance requirements than savings accounts.

The panel noted that for individuals or small business owners with low, seasonal or inconsistent business income, maintaining such a balance can be a challenge. It warned that repeated penalties for failing to maintain sufficient balance, combined with the lack of interest accrual, could significantly erode small business owners’ working capital, which could hinder business growth.

Published on February 17, 2026