Public sector banks may scrap minimum balance fines: These PSU banks have waived the penalty

Public Sector Banks (PSBs) are in discussions with the Ministry of Finance to reconsider their stance of mandating customers to maintain a minimum balance in their savings deposit accounts amid the falling share of CASA deposits in the banks, reported the news portal Times of India on Monday, 7 July 2025.

According to the news portal’s report, the CASA or Current Account Savings Account deposits are declining in their share amongst the total deposits in the PSBs. 

In a meeting with the Finance Ministry, government officials have questioned the PSU banks on the need to penalise customers who do not maintain a minimum balance for their deposit accounts, according to the news report. The rising concerns of the Ministry were over the slowdown in the low-cost CASA deposits of the banks.

What do the bankers say?

Bankers citing Jan Dhan data told the news portal that many of these customer bank accounts were ‘initially dormant’, and the balances rose steadily. They said this was due to the influence of the national policy shift.

Jan Dhan data is financial information collected under the Pradhan Mantri Jan Dhan Yojana (PMJDY), the national mission for financial inclusion. The data includes details of basic savings bank accounts opened under the scheme, the number of accounts, the total deposits, and the usage of India-made RuPay cards and other financial services. 

India’s banking regulator, the Reserve Bank of India (RBI), in its financial stability report released on 30 June 2025, also said that the growth in term deposits and the share of the higher-cost term deposits continued to outpace the current account and savings account deposits for the banks.

Which banks have no minimum balance requirements?

According to Mint’s earlier report, many public sector banks, such as the State Bank of India in 2020, Bank of Baroda, Punjab National Bank, Indian Bank, and the most recent Canara Bank on 1 June 2025, have dropped their mandate for customers to maintain a minimum account balance (MAB).

In these banks, if a customer fails to maintain their MAB, the PSU lender will not charge any penalty for the same. However, private sector banks like Axis Bank, HDFC Bank, and ICICI Bank are among others who has penalties imposed on the account holders who fail to maintain the minimum balance.

The news portal reported that the PSU banks had started to remove the minimum balance requirement after a Right to Information (RTI) revealed that penalties collected for non-maintenance of balances surpassed the bank’s net profits, which are offset by provisions for bad loans.

Private banks offer certain products for their customers, like zero-balance accounts and salary accounts, which waive the need for a minimum account balance. However, the customers who opened their Jan Dhan accounts immediately got this minimum balance requirement waived.

According to the news portal’s report, banks have historically used returns from low-interest savings accounts to cross-subsidise banking services. However, the major costs have been reduced after pivoting towards digital banking, and the new approach is to recover the costs from the maintenance charges and via debit card fees and charges for transactions beyond the free limits.

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