Private Banks Pocket Most of Rs 7,000 Crore Low-Balance Fees

Indian banks collected Rs 7,086.63 crore in FY26 from customers who failed to keep the minimum average balance in savings and current accounts, according to data the finance ministry shared in the Rajya Sabha. Private sector banks took Rs 4,948.71 crore of that total, more than double the Rs 2,137.92 crore gathered by public sector banks.

HDFC Bank alone booked Rs 1,798.14 crore. Axis Bank added Rs 1,081.33 crore. The two lenders supplied 58 percent of all private-bank collections. The haul arrives even as most public lenders have stopped levying the same penalty on savings accounts and basic accounts stay free.

The Full Year Tally by Lender

Minister of State for Finance Pankaj Chaudhary placed the figures before the Rajya Sabha on 28 July 2026, citing Reserve Bank of India data. Nineteen private banks and the public sector group both appear in the reply.

Together HDFC and Axis accounted for Rs 2,879.47 crore. That sum alone exceeds the entire public-sector collection.

Public Banks Step Away While Privates Stay In

Of the 12 public sector banks, 10 have discontinued penal charges for non-maintenance of minimum average balance on savings accounts. The remaining two have only rationalised the fees. SBI stopped levying the penalty on regular savings accounts in March 2020; its reported Rs 477.27 crore relates solely to current accounts.

• Ten of twelve PSBs now charge zero MAB penalty on savings.
• SBI waiver on savings has run more than six years.
• Private banks still apply board-approved MAB schedules that can run into thousands of rupees monthly for urban customers.
• Fee income from shortfalls remains material for the largest private names.

The split leaves private-bank customers carrying most of the ongoing burden. Public-sector balance sheets no longer lean on the same line item.

What the Charge Looks Like

Banks set a Monthly Average Balance or Average Quarterly Balance that varies by branch category and product. Miss the average and the bank debits a fee, usually calculated as a percentage of the shortfall subject to a cap, plus GST.

For a regular savings account at HDFC Bank urban minimum average balance of Rs 10,000 applies in metro and urban branches. Semi-urban sits at Rs 5,000 and rural at Rs 2,500 (or linked fixed-deposit alternatives). The bank’s consolidated savings account fees schedule shows non-maintenance charges often framed as 6 percent of the shortfall or a fixed rupee ceiling, whichever is lower, depending on the product variant.

RBI rules require the charges to be reasonable, transparent and broadly aligned with the cost of maintaining the account. The RBI customer service guidelines on bank charges have long stressed advance notice and fairness after earlier complaints about opacity.

Who Pays and Who Never Faces the Levy

Around 73 crore Basic Savings Bank Deposit Accounts, including those opened under Pradhan Mantri Jan Dhan Yojana, carry no minimum-balance requirement and attract no penalty. That exemption covers the bulk of financial-inclusion accounts. Salary accounts, student variants and certain digital or zero-balance products at many banks also sit outside the charge.

The fee therefore concentrates on ordinary savings and current accounts that still carry an MAB clause. Customers who dip below the line month after month can see repeated debits. One reaction circulating on X captured the circular logic:

Customer: “I do not have enough money in my account.” Bank: “In that case, we will take some more.”

Dr Akkshye Tulsyan posted the line alongside the FY26 total and called for a serious policy review. Similar posts noted that the penalty hits students and lower-income holders hardest even though the poorest inclusion accounts remain free.

Four Years of Rising Collections

The single-year figure sits inside a longer climb. Government data compiled across four years put the cumulative total above Rs 26,170 crore.

1. FY23, Rs 5,359 crore
2. FY24, Rs 6,294 crore
3. FY25, Rs 6,975 crore
4. FY26, Rs 7,086.63 crore (or Rs 7,087 crore rounded in several tallies)

Private banks have driven most of the absolute growth. Public banks’ share has shrunk as more of them exited the savings penalty. The pattern continues even while banks also chase other liability pools, including Indian banks courting diaspora deposits amid rupee pressure and newer clarity on RBI rules letting banks lend against NRI deposits.

Cost Recovery Meets the Customers Least Able to Pay

Banks defend MAB fees as compensation for the cost of running low-balance accounts: branch infrastructure, digital rails, statements and compliance. RBI language itself links charges to those costs. Yet the largest single collectors remain the private banks that still enforce high urban thresholds, while the public sector has largely chosen a different path and inclusion products stay free.

The irony sits in the numbers. The fee is triggered precisely when an account holder already lacks the cash to meet the average. Repeated charges can push a thin balance lower still, although RBI guidance has long barred banks from driving a savings account into negative territory solely through such penalties. Customers can escalate to the Banking Ombudsman if a bank refuses to reverse improper debits.

Parliament replies also note that PSB financial health has improved on other metrics: stronger balance sheets, record profits and multi-decade-low GNPAs. Fee income from MAB is no longer central to that story for most public lenders. For the two private banks that together took Rs 2,879 crore in one year, the line remains material.

Pressure Points That Persist

No fresh RBI circular has abolished the charge. Board-approved policies still govern non-BSBDA accounts. Transparency rules require banks to display the MAB, the fee schedule and to give advance notice of shortfalls. Customers can switch to zero-balance variants, convert to BSBDA where eligible, or move to a PSB that has dropped the savings penalty.

The FY26 data simply make the distribution visible again: private banks still collect the bulk, public banks have largely stepped back, and the accounts opened for inclusion never pay. That split, more than the headline crore figure, is what the latest Parliament numbers put on the table.

Frequently Asked Questions

What is a minimum average balance charge?

It is a fee a bank debits when the daily average balance in a savings or current account falls short of the product’s required Monthly Average Balance or Average Quarterly Balance over the calculation period; the amount is usually a percentage of the shortfall subject to a rupee cap plus GST, set by the bank’s board under RBI reasonableness rules.

Which bank accounts never face minimum-balance penalties?

Basic Savings Bank Deposit Accounts and Pradhan Mantri Jan Dhan Yojana accounts are fully exempt; roughly 73 crore such accounts currently attract zero penalty, and many salary, student and special zero-balance variants at individual banks also sit outside the charge.

How much did the top private banks collect in FY26?

HDFC Bank collected Rs 1,798.14 crore and Axis Bank Rs 1,081.33 crore; together they formed 58 percent of the Rs 4,948.71 crore private-sector total, far ahead of ICICI Bank’s Rs 353.50 crore and Kotak Mahindra Bank’s Rs 290.65 crore.

Have public sector banks stopped these charges?

Ten of the twelve PSBs have discontinued penal charges for non-maintenance of minimum average balance on savings accounts; SBI ended the savings penalty in March 2020 and reports only current-account collections, while the remaining two PSBs have rationalised rather than fully removed the fee.

What do RBI rules say about the size of these fees?

RBI requires that non-maintenance charges be reasonable, transparent and broadly aligned with the actual cost of providing the account services; banks must display the schedule, give prior notice of shortfalls, and cannot drive a savings account balance below zero solely through the penalty.