Many big government banks of the country have stopped levying penalty for not maintaining minimum balance on savings account. So now if you have zero balance in your account then there is no need to worry. The aim of government banks is to make banking services available to more and more people.
There are many rules and regulations after opening an account in the bank, which are very important to follow. It is necessary to maintain a minimum balance on opening a savings account in the bank. Now this issue of minimum balance is in the headlines these days. Government banks have freed the customers from the hassle of minimum balance, but private banks have not yet released any update in this rule. In such a situation, there is a provision of imposing a penalty for not maintaining minimum balance in private banks.
Now the curiosity of the common man is increasing that why did the government banks end the hassle of minimum balance? In this matter, two bankers said that removing the minimum balance will not have much impact on the earnings of the banks. At the same time, banks believe that the reach of banking services will increase with the minimum balance. More and more common people will connect with the bank. They will not have tension on their deposit amount that there will be a penalty if the money is less. A banker said that we want more and more people to open an account in the bank. Now there is no pressure to maintain minimum balance in the account.
These banks have removed the penalty on minimum balance
A banker said that government banks have done a study. After this, they have come to the conclusion that despite the penalty on minimum balance, banks can easily function. There will be no significant impact on their earnings. Meanwhile, the Reserve Bank of India also wanted the banks to pay more attention to the complaints. In such a situation, the banks abolished the penalty on minimum balance. The country’s largest government bank State Bank of India (SBI) was the first to remove the penalty on minimum balance. SBI had abolished the penalty on minimum balance 5 years ago. Recently, government banks like Canara Bank, Punjab National Bank, Indian Bank, Bank of Baroda and Bank of India have also abolished the penalty on minimum balance.
Interest rate reduced in savings account
At present, the entire banking industry is facing the problem of low deposit base. At this time people are hesitant to keep their savings in the bank. For example, in the year 2024-25, the savings account base of SBI has grown at a rate of only 2.8 percent. At the same time, the savings account base of HDFC Bank, India’s largest private sector bank, has grown at a rate of 5.3 percent.
Keep in mind that the higher the CASA (current account and savings account) deposit of the bank, the lower the funding cost of the bank. Here, no interest is given on the current account. Now the interest rates on savings accounts are continuously decreasing. Because of this, people are shying away from keeping money in banks. The interest being received in savings account is much less than FD. However, after Corona, the trend of Indians has increased rapidly towards the equity market.
Customers’ earnings from savings accounts have reduced
Karan Gupta, director of credit rating agency India Ratings and Research, says that currently the interest rates on savings accounts are 2.5 percent. At one time, these interest rates were 3.5 to 4 percent. In such a situation, many customers used to earn well from savings accounts. Now even that income has reduced. Banks do not have any special incentive to keep money in savings accounts. Gupta further said that it is better to remove the penalty on minimum balance. The reason for this is that despite low interest rates, customers were being forced to keep money in their accounts.
Banks earned huge profits from minimum balance penalty
Union Minister of State for Finance Pankaj Chaudhary, in response to a question in Parliament on 24 July 2024, said that in the year 2023-24, public sector banks have earned Rs 2,331 crore from penalty for not maintaining minimum balance. According to Capitaline, this is 0.3 percent of their FY 2024 revenue.
Deposits in public sector banks decreased
According to RBI data, between the end of March 2020 and 2025, the share of deposits in public sector banks fell by 580 basis points to 55.8%, while in the same period, deposits in private sector banks have seen an increase of 570 basis points and it has become 35.2 percent. Experts say that people trust public sector banks more. Despite this, the deposits in public sector banks are very less compared to private banks. Pratik Shah of consulting firm EY India says that by eliminating the penalty on minimum balance, government banks may suffer a loss of about Rs 1,700 crore. Along with this, the risk of accounts becoming inactive will also remain.
Know what is Average Monthly Balance
Average Monthly Balance (AMB) is the minimum amount that is required to be maintained in the account for a month. If this balance falls below the prescribed limit, the bank charges a penalty from the customer. But now in the banks which have removed this rule, customers will not have this tension.
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