INR 26,170 Crore: The Penalty Machine By Banks Hiding In Your Savings Account!

On July 29, 2026, in a written reply to the Rajya Sabha, Minister of State for Finance Pankaj Chaudhary put an official, government-verified number on something millions of Indians have long suspected but never had proof of: banks collected more than ₹26,170 crore from customers over four financial years (FY23 to FY26) purely as penalties for failing to maintain a Minimum Average Balance (MAB) in their own accounts.

This is not revenue banks earned by lending your money out, charging you interest, or selling you a product. This is revenue generated through penalties imposed on customers who fail to maintain the contractually required minimum balance—a policy critics argue disproportionately affects customers under financial stress. In FY26 alone, the most recent full year on record, that figure was ₹7,086.63 crore. The year before, FY25, it was ₹6,974.79 crore. The trend is not shrinking. It is holding steady at roughly ₹7,000 crore a year, quarter after quarter, drawn largely from the accounts of people who can least afford to lose it.

This is the story of where that money actually comes from, who is collecting the most of it, why regulators have let this practice persist for over a decade despite repeated public criticism, and crucially, what it says about the relationship between India’s banking system and the very customers it was built, in no small part with public trust and public deposits, to serve.

Following the money: who collected what

The government own breakdown is compiled from data submitted by public sector banks and the RBI. The data strongly suggests that, for some banks, minimum-balance penalties remain an important component of retail banking revenue.

Private banks collected ₹4,948.71 crore in FY26 alone — more than double the ₹2,137.92 crore collected by all public sector banks combined, despite public sector banks serving a considerably larger, and on average considerably poorer, customer base across rural and semi-urban India.

The private-bank breakdown reads like a leaderboard of exactly the institutions marketed to India’s aspirational middle class as premium, customer-first, digitally sophisticated banking brands:

Two names alone, HDFC Bank and Axis Bank, accounted for roughly 58% of every rupee collected by private banks in penalties that year. HDFC Bank’s ₹1,798.14 crore is not a rounding error in a bank’s annual report; it represents a substantial recurring source of fee income, collected one ₹300–₹600 quarterly deduction at a time, from millions of individual account holders who, in the vast majority of cases, likely never chose to be charged and frequently didn’t notice until well after the fact.

Compare that against the public sector side of the ledger:

SBI’s ₹477.27 crore comes exclusively from current accounts, because the bank stopped charging MAB penalties on ordinary savings accounts back in March 2020. Ten of India’s twelve public sector banks have now abolished these charges on savings accounts entirely.

That is not a minor footnote — it is proof, in the government’s own words, that a fully functioning, profitable, nationwide banking operation does not actually require penalising low-balance customers to survive. If SBI — the country’s largest bank by every meaningful metric, serving hundreds of millions of savings accounts — can run without this revenue stream, the argument that it is operationally necessary for HDFC Bank or Axis Bank starts to look considerably thinner.

This has happened before — and regulators already knew it was a problem

It would be a mistake to treat this ₹26,170 crore figure as a fresh, isolated revelation. The uncomfortable truth is that Indian regulators and lawmakers have been circling this exact issue, publicly, for well over a decade — and the practice has simply persisted, adapted, and, in the case of certain private banks, scaled up.

2013: The RBI’s own first warning. As far back as January 2013, the RBI summoned bankers after its policy review specifically to address what it called “steep charges” for minor shortfalls in minimum balance. A central bank official at the time noted that customers were being penalised on what the RBI personnel called “flimsy grounds”, citing cases where a shortfall of just ₹100 in the required balance resulted in penalties exceeding ₹500. The RBI’s own language, on the record, more than a decade ago, was that some banks were penalising customers disproportionately to the actual shortfall, precisely the practice its later guidelines were meant to prevent.

2017-18: SBI’s own ₹1,772 crore controversy. SBI, which today proudly cites its 2020 decision to scrap MAB penalties, was itself at the centre of a public backlash just a few years earlier. After reintroducing monthly average balance charges in April 2017 — six years after previously dropping them — SBI collected ₹17.72 billion (₹1,772 crore) in just eight months, a sum that, remarkably, exceeded the bank’s own quarterly profit for that period.

The backlash from customers and public criticism was significant enough that SBI reduced the charges by October 2017, and eventually abolished them on savings accounts altogether by 2020. The pattern here is worth underlining: public pressure and scrutiny visibly changed SBI’s behaviour. The question this investigation raises is why that same pressure has not produced the same outcome at HDFC Bank or Axis Bank.

2021: RBI actually fined a bank over this exact issue. In December 2021, the RBI imposed a monetary penalty of ₹30 lakh on ICICI Bank specifically for non-compliance with its own directions on levying charges for non-maintenance of minimum balance in savings accounts — a rare instance of the regulator not merely issuing guidance, but formally penalising a bank for how it implemented MAB charges.

This detail tends to get lost in the bigger headline numbers, but it is arguably the most important fact in this entire story: the RBI’s own enforcement action confirms that at least one major bank was found, on inspection, to be applying these charges incorrectly — not hypothetically, not according to customer complaints alone, but according to the regulator’s own statutory inspection.

That the same institution’s peers continue to collect hundreds and thousands of crores annually through this mechanism, years after that finding, is the kind of detail that deserves far more scrutiny than a single-day news cycle typically affords it.

The mechanics of the trap: how “quietly” this actually happens

The government’s own data release included a detail that reads almost like a penalty that “usually appears quietly, typically ₹300–600 per quarter, and by the time customers notice, several billing cycles may have already passed.”

Sit with the word “quietly” for a moment, because it is doing a lot of work in that sentence. RBI guidelines do require banks to notify customers — via SMS, email, or letter — before levying MAB charges, and to give them a window to restore their balance. The deductions are often small enough that some customers may notice them only after several billing cycles.

On paper, this sounds like a reasonable, customer-protective process. In practice, anyone who has actually banked in India knows the reality: SMS alerts from banks arrive in an undifferentiated flood alongside promotional messages, OTPs, and marketing spam; email notifications routinely land in spam folders or go to addresses customers stopped checking years ago; and the “window to restore balance” is a matter of attention of the customer, which is easy to miss entirely if you are, say, a daily-wage earner without consistent banking access, a student living off intermittent parental transfers, or simply someone whose salary got delayed by a few days that particular month.

This is precisely why the practice disproportionately affects the customers least equipped to absorb it. Consider who is actually falling short of a minimum balance requirement in the first place: by definition, it is not the affluent, financially comfortable customer with a healthy buffer sitting in their account. It is, structurally and almost by design, the customer closest to the edge — the one whose balance dips below ₹10,000 (a common metro MAB requirement) because rent was due, or a medical bill came in, or a paycheck was a week late. The penalty, in other words, activates precisely at the moment of financial stress, adding a fresh charge exactly when a customer has the least capacity to pay it. 

The scale question: is ₹26,170 crore actually a big deal for these banks?

This is the fair, sceptical question any rigorous report has to ask, and it deserves an honest answer rather than outrage for its own sake.

In absolute terms, ₹26,170 crore over four years, roughly ₹6,500 crore a year on average across the entire Indian banking sector is genuinely large by any household standard, but it is worth placing next to the scale of the institutions collecting it. HDFC Bank alone posted a standalone profit after tax of ₹74,670 crore (₹746.7 billion) for FY26, meaning its ₹1,798.14 crore in MAB penalty collections that year amounted to roughly 2.4% of its annual profit. Axis Bank’s FY26 standalone net profit was ₹24,456.66 crore, against which its ₹1,081.33 crore in MAB penalties represents roughly 4.4% of profit.

Those percentages might sound modest on a spreadsheet. But that framing is precisely the trap worth naming and rejecting: the fact that a revenue stream is a small percentage of a bank’s overall profit does not make it any less real, or any less consequential, for the individual customer paying it.

A ₹1,798-crore collection is immaterial to HDFC Bank’s balance sheet in the sense that the bank would remain highly profitable without it. It is entirely material, however, to the individual customer who lost ₹500 in a single quarter, money that, for someone living paycheck to paycheck, is not a rounding error at all, but a real, felt loss that could have covered groceries, a child’s school fee instalment, or a bus fare for the week.

This is the uncomfortable core of the critique: a bank does not need this revenue to survive, by its own profit numbers, and by the demonstrated example of SBI and ten other public sector banks that have abandoned the practice entirely. It continues to exist despite evidence that several large public-sector banks have successfully eliminated similar charges. That is a very different, and considerably less sympathetic, justification than “we need this to keep the lights on.”

The regulatory paradox: why does the RBI allow this at all?

Here is where the investigation turns toward the regulator itself, because the RBI’s own stated position on MAB penalties is, on close reading, a study in institutional ambivalence.

The RBI does not fix a minimum balance requirement, nor does it set the penalty amount for falling short. That decision is left entirely to each bank’s board, guided only by two broad principles: the penalty must be “proportionate” to the shortfall, and the bank must notify the customer and give them time to restore the balance before charging anything. Both principles sound reasonable in isolation. In practice, both have proven remarkably difficult to enforce with any real teeth — the ICICI Bank penalty from 2021 being one of the very few publicly documented instances of the RBI actually finding, and formally punishing, a bank for violating them.

There is a defensible case for the RBI’s hands-off approach: minimum balance requirements do, in principle, help banks manage the operational cost of maintaining millions of low-activity accounts, and a total ban on all such charges could, in theory, push banks toward other, less transparent ways of recovering those costs — higher fees elsewhere, reduced free services, or reluctance to open small accounts at all. Banking industry representatives have consistently argued along these lines: that minimum balances help fund liquidity, service infrastructure, and the broader lending capacity that ultimately benefits the economy.

But that argument sits awkwardly next to the government’s own data. If minimum balance penalties were genuinely, uniformly necessary for operational viability, you would expect to see them applied with reasonable consistency across the sector. Instead, what the data actually shows is a stark and growing divergence: nearly the entire public sector banking system — the segment serving India’s largest, most financially vulnerable customer base, including hundreds of millions of Jan Dhan and BSBD account holders — has walked away from the practice almost entirely, while a small handful of the country’s most profitable private banks continue to extract billions of rupees a year from it.

That divergence is not easily explained by “operational necessity” alone. It looks, on the evidence, considerably more like a business choice some institutions have made and others have chosen not to make — and the RBI, by design, has left that choice entirely to individual bank boards rather than setting a sector-wide standard.

What “financial inclusion” actually means when penalties exist

India’s official banking narrative over the past decade has centred, proudly and repeatedly, on financial inclusion — the Pradhan Mantri Jan Dhan Yojana, the push to bring unbanked citizens into the formal financial system, the celebrated statistic that India now has roughly 73 crore Basic Savings Bank Deposit Accounts (BSBDAs), including Jan Dhan accounts, that require no minimum balance at all and offer basic banking services free of charge.

That is a genuine, significant achievement, and it deserves to be acknowledged as such rather than dismissed. But it also draws attention, by contrast, to exactly who remains exposed to MAB penalties: customers who are formally banked, often for years, in ordinary savings or salary accounts — not the newly-included unbanked population the Jan Dhan scheme specifically protects, but rather existing customers who, for one reason or another (a lost job, an account left over from a previous employer, insufficient awareness of BSBDA conversion options), never moved into a zero-balance product.

This is the population the government’s own advisory implicitly targets when it urges customers to “know your MAB requirement,” “convert to a salary account if eligible,” or “consider a Basic Savings Bank Deposit account.” That advice is genuinely useful — but notice what it also quietly concedes: that the burden of avoiding this penalty is placed almost entirely on the customer’s own vigilance and financial literacy, not on the bank’s design choices.

A customer who doesn’t know BSBDA conversion is an option, doesn’t read the fine print at account opening, or simply doesn’t have the digital fluency to navigate a mobile banking app’s alert settings, remains fully exposed — and it is precisely that population, by definition, that is least equipped to protect itself.

There is a reasonable, non-defamatory question worth asking here, directed not at any single institution but at the system as a whole: if the explicit national policy goal is financial inclusion, is a revenue model that disproportionately penalises financially precarious existing customers — rather than proactively migrating them into already-available zero-balance products — fully aligned with that goal, or does it sit in quiet tension with it?

What customers can actually do — and why “know your rights” only goes so far

To its credit, the government’s data release came packaged with genuinely practical advice, and it is worth repeating clearly, because it is the one part of this story where an individual reader has real agency:

• Know your specific MAB requirement — it varies by branch location (metro, urban, semi-urban, rural) and account type (savings, salary, current), so a blanket assumption based on a friend’s account or an old figure can be wrong.
• Convert to a salary account if eligible — most carry a zero MAB requirement as long as salary credits continue regularly, making this one of the simplest fixes for a working professional.
• Set low-balance alerts above your actual MAB threshold, not exactly at it — giving yourself a buffer window rather than finding out only after you’ve already dipped below the line.
• Audit and close dormant accounts from previous employers or old relationships — multiple inactive accounts each carrying their own MAB requirement is one of the most common, avoidable ways people accumulate penalties without realising it.
• Ask specifically about BSBD or PMJDY accounts, which carry no minimum balance requirement under RBI rules and are available to any customer, not only first-time bank users — a detail that is not always volunteered proactively by bank staff.
• Use auto-sweep facilities where available, which can automatically top up a savings account from a linked fixed deposit whenever the balance dips, while the surplus continues earning a slightly better rate.

All of this is sound, actionable advice — and readers should genuinely use it. But it is worth being honest about its limits as a systemic solution: advice that says “protect yourself” is fundamentally different from a system that says “we won’t charge you for being poor in the first place.” Ten public sector banks have already demonstrated the latter is entirely possible at national scale. The remaining question — for regulators, for lawmakers, and for the millions of customers who will open a new account this year without ever reading the MAB clause in the terms and conditions — is why the rest of the banking sector hasn’t been required, rather than merely encouraged, to follow.

The bottom line

Government data now confirms, in black and white, what many Indian bank customers have long suspected from their own bank statements: minimum balance penalties are not a marginal inconvenience or an occasional oversight. They are a ₹26,170-crore, four-year, sector-wide revenue stream, concentrated overwhelmingly among a handful of private banks whose annual profits run into the tens of thousands of crores, extracted largely through small, quietly-applied quarterly deductions from customers who are, almost by definition, among the least financially cushioned in the banking system.

None of this suggests wrongdoing on the scale of fraud, and this piece makes no such claim — MAB penalties are legal, disclosed in account terms, and subject to RBI guidelines that at least one bank has already been formally penalised for violating. But legality and fairness are not the same question, and the fact that ten of India’s twelve public sector banks — including the country’s largest, SBI — have concluded they can operate profitably and sustainably without this revenue stream is, in itself, the most powerful evidence in this entire dataset.

It suggests that for the banks that continue the practice, the justification is no longer really about operational necessity. It is about a choice — one that keeps generating roughly ₹7,000 crore a year, one ₹300-₹600 deduction at a time, from the accounts of people who can least afford to notice it too late.