Bank Frauds in India: Minimum Balance and Other Charges or Penalty on Account Holders?
In India, individual banks determine the minimum balance requirements and associated penalties for savings accounts, as the Reserve Bank of India (RBI) has not set specific guidelines in this regard. Consequently, these requirements and charges can vary significantly across different banks and account types
Bank frauds in India have been a growing concern, particularly regarding the hidden charges and penalties imposed on account holders. Recent discussions in parliament have highlighted various fees that banks charge, which many customers may not be fully aware of.
Minimum Balance Penalties
Banks often impose penalties for not maintaining a minimum balance in savings accounts. According to Raghav Chadha, an AAP Rajya Sabha MP, these penalties can range from ₹100 to ₹600, contributing to significant revenue for banks—approximately ₹3,500 crore in the fiscal year 2022-23 alone. This practice has raised concerns about transparency and fairness, as many customers may not realize how much they are being charged.
Other Charges and Fees
In addition to minimum balance penalties, banks charge for various services:
ATM Usage: Most banks allow a limited number of free ATM transactions per month (usually two to three). Exceeding this limit incurs charges of around ₹20 per transaction.
Inactivity Fees: If an account remains inactive for a certain period, banks may levy an inactivity fee ranging from ₹100 to ₹200 annually.
Statement Fees: Requesting bank statements can also incur charges of ₹50 to ₹100.
SMS Alerts: Customers may be charged ₹20-25 quarterly for SMS alerts regarding their account activity.
Loan Processing Fees: Banks charge 1-3% of the loan amount as processing fees, and additional penalties apply for early loan closure.
Regulatory Framework
The Reserve Bank of India (RBI) has established guidelines to ensure that banks inform customers about minimum balance requirements and associated penalties at the time of account opening. Banks are required to notify customers if their balance falls below the minimum threshold and provide a one-month grace period before imposing penalties. Notably, the RBI mandates that account balances should not turn negative solely due to these charges.
However, there are reports suggesting that some banks do not fully adhere to these guidelines, leading to customer dissatisfaction and claims of malpractice.
Recent Changes
Starting April 1, 2025, several major banks will implement revised policies regarding minimum balance requirements and ATM transaction fees. These changes aim to enhance security and streamline banking operations but may also increase costs for consumers who do not maintain the required balances or exceed transaction limits.
Banks in India impose various charges that can significantly impact account holders’ finances, regulatory measures exist to protect consumers. However, the effectiveness of these measures remains a topic of ongoing debate.
Bank frauds in India and the issue of minimum balance charges or penalties on account holders are distinct yet interconnected topics that affect millions of banking customers, particularly those from economically vulnerable sections.
Bank Frauds in India
Bank frauds in India encompass a wide range of illicit activities aimed at deceiving financial institutions or their customers for personal gain. These frauds can include:
Loan Frauds: Dishonest borrowers, sometimes in collusion with bank officials, secure loans using falsified documents or non-existent entities, only to default or disappear with the funds.
Wire Transfer Fraud: Criminals exploit interbank transfer systems to siphon large sums, often routing money to offshore accounts using forged documents.
Phishing and Identity Theft: Fraudsters use deceptive emails, calls, or websites to steal personal and financial information like account details, PINs, or card numbers, subsequently draining victims’ accounts.
Cheque Fraud: This involves forging or altering cheques to withdraw money illicitly.
Computer-Based Fraud: With the digitization of banking since the 1990s, fraudsters have targeted online systems, using malware or social engineering to access accounts.
The scale of bank frauds has grown with increased digitization. The Reserve Bank of India (RBI) and agencies like the Central Bureau of Investigation (CBI) have been working to curb these activities, with initiatives like the Bank Case Information System (BCIS) launched in 2012 to track offenders. Customers are often advised to report fraud immediately (e.g., via the cybercrime.gov.in portal or helpline 1930) to mitigate losses, though recovery is not guaranteed.
Minimum Balance Charges and Penalties
Minimum balance requirements are a policy enforced by many Indian banks, particularly on regular savings accounts, where customers must maintain a specified average monthly balance (AMB). Failure to do so incurs penalties, which have sparked significant debate due to their impact on low-income account holders. Here’s how this works:
Policy Overview: Banks like State Bank of India (SBI), HDFC Bank, ICICI Bank, and Punjab National Bank set AMB limits based on location (metro, urban, semi-urban, rural). For example, prior to 2020, SBI required Rs 3,000 in metro areas, Rs 2,000 in urban areas, and Rs 1,000 in rural areas. Private banks often have higher thresholds, sometimes up to Rs 10,000.
Penalty Mechanism: If the AMB falls short, banks levy charges. These penalties vary—e.g., Rs 5 to Rs 15 plus taxes at SBI historically, or up to Rs 500 at some private banks. The RBI’s 2014 guidelines mandate that banks notify customers (via SMS, email, or letter) and provide a one-month grace period to restore the balance before imposing charges. Importantly, the RBI prohibits banks from driving savings account balances into the negative solely due to these penalties; instead, charges accrue and are deducted from future deposits.
Scale of Collection: Between 2018 and 2023, Indian banks reportedly collected over Rs 21,000 crore in minimum balance penalties, with more recent estimates suggesting Rs 8,500 crore over five years. This burden disproportionately affects poor and middle-class account holders, who may struggle to maintain required balances.
Exceptions and Reforms: Certain accounts, like those under the Pradhan Mantri Jan Dhan Yojana (PMJDY), basic savings accounts, and inoperative accounts (per recent RBI guidelines), are exempt from minimum balance penalties. SBI, India’s largest bank, waived these charges entirely for all savings accounts effective March 11, 2020, alongside SMS fees, benefiting its 44 crore+ account holders. However, other banks, including private ones like YES Bank, have faced scrutiny for non-compliance—e.g., YES Bank was fined Rs 91 lakh by the RBI in 2024 for wrongly charging penalties on zero-balance accounts.
Intersection of Fraud and Charges
While minimum balance penalties are a legitimate (though controversial) banking practice, they differ from fraud, which involves intentional deceit. However, the two intersect in cases of unethical banking practices:
Unauthorized Charges: Some banks have been accused of levying penalties improperly (e.g., on exempt accounts), prompting regulatory action like the YES Bank penalty. This blurs the line between legal charges and exploitative behavior.
Fraud Vulnerability: Customers unable to maintain minimum balances may close accounts, leaving them dormant and more susceptible to fraud if personal details are misused by fraudsters or insiders.
Impact on Account Holders
Economic Strain: Penalties erode savings, particularly for low-income individuals, while frauds can wipe out entire balances, leaving victims financially crippled.
Policy Critique: Critics argue that minimum balance rules are a form of “legalized pickpocketing,” alongside other hidden charges (ATM fees, SMS alerts, cheque book fees), disproportionately targeting the vulnerable. Posts on X reflect this sentiment, highlighting the Rs 8,500 crore collected in penalties as a burden on the poor and middle class.
Relief Measures: SBI’s waiver and RBI’s protective guidelines (e.g., no negative balances, exemptions for basic accounts) offer some respite, but implementation varies across banks.
Bank frauds in India involve deliberate criminal acts that exploit financial systems, while minimum balance penalties are a systemic issue rooted in banking policy. Both disproportionately affect account holders with limited resources—frauds through direct theft, and penalties through incremental deductions. While the RBI and some banks like SBI have taken steps to mitigate the latter, fraud remains a persistent threat requiring vigilance from both regulators and customers. For account holders facing wrongful charges, options include seeking waivers, switching to zero-balance accounts, or lodging complaints with the bank or RBI ombudsman.
Bank frauds in India related to minimum balance requirements and other charges often involve hidden fees, unfair penalties, or deceptive practices by banks. Here’s an overview of how such frauds or unethical practices occur:
1. Minimum Balance Charges
Many banks require customers to maintain a minimum average balance (MAB) in their savings or current accounts.
If the balance falls below this limit, banks automatically deduct penalties, often without clear communication.
Some customers don’t receive alerts before the deductions, leading to continuous penalties.
In some cases, excessive penalties have wiped out small savings of account holders.
2. Unfair or Hidden Charges
Transaction Fees: Some banks charge high fees for ATM withdrawals beyond the free limit.
Cash Deposit/Withdrawal Charges: Banks now charge for deposits and withdrawals beyond a certain limit.
Inactivity Charges: If an account is not used for a certain period, banks may impose penalties.
SMS Alert Charges: Some banks charge for SMS alerts, often deducting without proper consent.
Service Charges on Low-value Transactions: Charges on UPI or NEFT transactions beyond a limit.
3. Unauthorized Deductions & Frauds
Some frauds involve unauthorized deductions in the name of policy renewal (e.g., insurance schemes).
Banks sometimes push third-party products (insurance, mutual funds) and deduct charges for services not explicitly requested.
Complaints have emerged about false loan processing charges or deductions under fake schemes.
4. RBI Guidelines on Minimum Balance & Charges
The Reserve Bank of India (RBI) has issued guidelines to ensure banks do not overcharge customers unfairly.
RBI states that banks must intimate customers properly before charging penalties.
Excessive or hidden charges may lead to regulatory action.
How to Avoid Such Issues?
Regularly check account statements for hidden charges.
Opt for zero-balance accounts (such as Jan Dhan accounts) if minimum balance maintenance is difficult.
Use digital banking alerts to stay informed about deductions.
If charged unfairly, file a complaint with the bank’s grievance cell and escalate to the RBI Ombudsman if unresolved.
Banks in India: Minimum Balance and Other Charges or Penalty on Account Holders?
In India, many banks impose minimum balance requirements on savings account holders, and failing to maintain this balance often results in penalty charges. These requirements and associated fees vary across banks, account types, and geographic locations (e.g., metro, urban, semi-urban, or rural areas).
Minimum Balance Requirements
Most banks in India require customers to maintain an Average Monthly Balance (AMB) or, in some cases, an Average Quarterly Balance (AQB). The AMB is calculated by summing the daily closing balance of an account over a month and dividing it by the number of days in that month. The specific amount depends on the bank and the location of the branch:
Public Sector Banks: Typically, these banks have lower minimum balance requirements compared to private banks. For example:
Punjab National Bank (PNB) requires Rs. 400 for rural areas, Rs. 500 for semi-urban, and Rs. 600 for urban/metro areas.
Bank of Baroda offers zero-balance accounts like the B3 Silver Account, but other savings accounts may have a Quarterly Average Balance requirement.
State Bank of India (SBI) does not charge for non-maintenance of AMB since March 2020, making it an exception among major banks.
Private Sector Banks: These often have higher thresholds:
HDFC Bank requires Rs. 10,000 AMB in metro/urban branches or Rs. 5,000 in semi-urban branches (or a fixed deposit alternative).
ICICI Bank mandates Rs. 5,000 AMB across branches, with lower amounts like Rs. 2,000 or Rs. 1,000 for rural or Gramin branches in some cases.
Yes Bank has tiered requirements, but specific AMB varies by account type.
Penalty Charges for Non-Maintenance
If the minimum balance is not maintained, banks levy penalties, which also differ by bank and location:
Public Sector Banks:
PNB charges Rs. 400–600 depending on the shortfall and location.
Indian Bank and Bank of Baroda have slab-based charges, often ranging from Rs. 100 to Rs. 600 per quarter.
In FY24, 11 public sector banks (excluding SBI) collected Rs. 2,331 crore in penalties, a 25.63% increase from Rs. 1,855 crore in FY23. Over five years, public sector banks amassed Rs. 8,495 crore from such fees.
Private Sector Banks:
HDFC Bank charges 6% of the shortfall or Rs. 600, whichever is lower.
ICICI Bank levies Rs. 100 plus 5% of the shortfall in required AMB.
Yes Bank applies 5–10% of the shortfall, depending on how much the balance falls below the requirement.
Zero-Balance Accounts: Certain accounts, like Basic Savings Bank Deposit Accounts (BSBDA), PM Jan Dhan Yojana accounts, and some offerings from banks like SBI or Bank of Baroda, are exempt from minimum balance requirements and penalties.
Other Charges
Beyond minimum balance penalties, banks may impose additional fees:
Transaction Limits: Exceeding free ATM withdrawals (e.g., 3–5 per month) or branch transactions can incur charges (e.g., Rs. 50 per extra transaction at SBI).
Service Fees: Chequebook issuance, locker usage, or statement requests beyond free limits often carry fees. For instance, SBI charges Rs. 75–150 for additional chequebooks.
Inoperative Accounts: Per RBI guidelines, banks cannot penalize for non-maintenance of minimum balance in accounts dormant for over two years, though other service charges may apply if reactivated.
RBI Guidelines
The Reserve Bank of India (RBI) regulates these practices:
Banks must notify customers via SMS or email if their balance falls below the minimum, giving them a month to replenish it before charging penalties.
Savings accounts cannot go negative solely due to these charges.
Basic accounts (e.g., BSBDAs) are free of minimum balance requirements and offer limited free transactions.
Trends and Criticism
Over the years, penalty collections have sparked debate. Public sector banks alone collected Rs. 5,614 crore from FY22–FY24, with PNB (Rs. 1,538 crore over five years) leading the pack. Critics argue these fees disproportionately burden low-income account holders, while banks defend them as necessary to offset operational costs. SBI’s decision to waive such charges since 2020 has been praised, though private banks continue to enforce them more stringently.
For the most accurate details, check your bank’s website or contact their customer service, as charges and policies can change. If you feel unfairly charged, you can request a waiver from your bank or escalate the issue to the RBI Banking Ombudsman.
For individuals seeking accounts without stringent balance requirements, the Basic Savings Bank Deposit Account (BSBDA) is an option. BSBDA accounts do not mandate a minimum balance and offer basic banking services, making them suitable for those who prefer to avoid non-maintenance charges.
It’s important to note that failure to maintain the stipulated minimum balance can lead to penalty charges, which are typically deducted directly from the account. In some cases, this can result in the account balance turning negative.
Given the variability in policies across banks, it’s advisable for account holders to consult their respective banks or visit official bank websites to obtain precise information about minimum balance requirements and associated penalties.
It’s important to understand that minimum balance requirements and other charges can vary significantly between different banks in India, and even between different types of accounts within the same bank.
Minimum Balance:
Variability:
Minimum balance requirements differ based on factors like:
The type of savings account.
The location of the branch (rural, semi-urban, urban, or metro).
Generally, metropolitan areas have higher minimum balance requirements compared to rural areas.
Examples:
Banks like HDFC Bank, ICICI Bank, and Axis Bank typically have minimum balance requirements that vary based on location.
The State Bank of India (SBI) has moved towards having many savings accounts that do not require minimum balance.
Banks like Bank of Baroda, and Union bank of india, have varying minimum balances depending on the location of the branch.
Zero Balance Accounts:
Some accounts, like the Pradhan Mantri Jan Dhan Yojana (PMJDY) accounts, are designed as zero-balance accounts.
Other Charges and Penalties:
Non-Maintenance of Minimum Balance:
If you fail to maintain the required minimum balance, banks typically levy a penalty. The amount of the penalty varies.
ATM Transactions:
Banks usually offer a certain number of free ATM transactions per month. Exceeding this limit can result in charges.
Cheque Returns:
Charges apply for bounced cheques (both issued and received).
NEFT/RTGS Transactions:
While online NEFT/RTGS transactions are often free, especially for smaller amounts, charges may apply for larger transactions or transactions conducted through branches.
Account Closure:
Some banks charge a fee for closing an account, especially if it’s closed within a certain period after opening.
SMS Alerts:
Some banks charge for SMS alert services.
Debit Card Charges:
Annual maintainance charges are often applied to debit cards.
Cheque book charges:
Banks often provide a limited number of free cheque leaves, and then charge for additional ones.
Key Considerations:
It’s crucial to check with your specific bank for their current minimum balance requirements and fee schedules.
Banks often publish their fee schedules on their websites or make them available at their branches.
Always read the terms and conditions of your bank account.
