Rs 19,083 crore lost to penalties: Why maintaining minimum balance in bank accounts matters

₹19,083 crore. That is the amount Indian banks have collected over the last three years from customers—not for loan defaults or missed EMIs, but simply for failing to maintain the required minimum balance in their accounts. The figure highlights a largely overlooked aspect of personal finance: the cost of not maintaining adequate balances.

Minimum balance refers to the lowest amount a customer must maintain in a savings account to avoid penalties. This requirement varies widely across banks, account types, and locations. While rural accounts may require as little as ₹500, urban and metro accounts at private banks can demand balances of ₹10,000 to ₹50,000 or more.

Failing to maintain this threshold triggers penalties, which may seem small individually but can compound significantly over time—especially for customers already facing financial constraints.

According to CA Kanan Bahl, founder of Fingrowth Media, the issue goes beyond just banking policy and touches on fairness. “Please note that the SBI is not charging minimum balance penalties on savings bank account for a very long time. However, it still collected ₹932 crores from such penalties levied on current accounts. Even PNB has discontinued charging such penalties w.e.f. July 1, 2025. I understand the commercial necessities behind such penalties but banks making money at scale due to people's financial crunch is extremely unfair. The fee should either be scrapped or reduced significantly,” Bahl said.

His remarks underline a broader concern: penalties disproportionately impact those with tighter cash flows, effectively penalising individuals for liquidity challenges rather than financial indiscipline.

Maintaining bank balance

From a financial planning perspective, maintaining the required balance is critical for several reasons. First, it helps avoid recurring penalty charges, which can erode savings over time. Second, it ensures uninterrupted access to banking services, as some banks may restrict transactions if balance requirements are not met. Third, it contributes to better financial discipline by encouraging individuals to maintain a liquidity buffer.

However, not all accounts operate under the same rules. The Reserve Bank of India (RBI) allows banks to set their own minimum balance requirements but mandates transparency. Customers must be informed of these requirements at the time of account opening, and penalties should be reasonable. Importantly, accounts such as Basic Savings Bank Deposit Accounts (BSBDAs), including Jan Dhan accounts, do not require any minimum balance and cannot attract penalties.

The wide variation in minimum balance requirements across banks also means that choosing the right account type is crucial. Public sector banks and certain digital accounts offer zero-balance options, while premium accounts from private banks often come with higher thresholds in exchange for added features.

 

For consumers, the takeaway is straightforward: ignoring minimum balance rules can lead to avoidable costs, but blindly maintaining high balances may also lock in idle funds that could otherwise be invested.

A balanced approach is key. Maintaining just enough to meet bank requirements while allocating surplus funds to higher-yield instruments can help optimise both liquidity and returns.

As the debate around fairness and banking charges continues, one thing remains clear—minimum balance is not just a banking rule, but a financial habit with real monetary consequences.