People’s Savings Worth Rs 5000 Crore Taken By Banks For Not Maintaining ‘Minimum Balance’

The Logical Indian Crew India

August 6th, 2018 / 3:45 PM

SBI Minimum Balance Penalty

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A whopping Rs 5,000 crore worth of penalties was collected in 2017-18 from the depositors by the banks for maintaining the minimum balance. The amount of penalties has gone up despite banks opening about 30.8 crore basic saving accounts for those who cannot afford to maintain minimum balance under the Jan Dhan Yojana scheme.

The State Bank of India (SBI), alone, in the financial year of 2017-18, collected Rs 2433.67 crores from its customers, as part of fines charged by it for not maintaining the minimum balance, the Firstpost reported. This fact was revealed in the Lok Sabha by the Minister of State for Finance Shiv Pratap Shukla.

Reportedly, the said fine was levied by the bank until 2012, after which the practice was discontinued and reintroduced by the bank again from April 1, 2017.

Fines collected by other banks

The Hindu Business Line informed that the total amount collected over the last four years by private and public sector banks was over Rs 11,500 crores. This amount was solely charged from the customers for not maintaining a minimum balance in their respective accounts. Moreover, it was also reported that HDFC bank has charged Rs 590 crores for the same, last year (2017-18), which was the largest among the three private banks (Axis, HDFC, ICICI).

The point to underline and the note is the fact that the total amount collected by the three large Private Banks in 2017-18 was reportedly around 40% (of 11,500 crores)and the remaining was levied by the 21 Public Sector Banks (PSBs).

The charges imposed were allowed by the Reserve Bank of India (RBI), which issued a master circular on July 1, 2015, titled ‘ Master Circular on Customer Service in Banks’. The circular mentioned, “At the time of opening the accounts, banks should inform their customers in a transparent manner the requirement of maintaining the minimum balance and levying of charges, etc., if the minimum balance is not maintained. Any charge levied subsequently should be transparently made known to all depositors in advance with one month’s notice. The banks should inform, at least one month in advance, the existing account holders of any change in the prescribed minimum balance and the charges that may be levied if the prescribed minimum balance is not maintained.”

Fines Structure

The State Bank of India categorizes its branches into different types and accordingly sets norms for minimum balance and fines charged.

Urban and Metro Branch:

Required Minimum Balance per month- Rs 3,000
Fines levied upon breach- Rs 10 per month plus GST for balance less than or equal to 1,500, Rs 12 per month if average balance less than 50-75% of the required minimum amount and Rs 15 if balance falls below 75% of the minimum.

Semi-Urban Branch:

Required Minimum Balance per month- Rs 2,000
Fines levied upon breach – Rs 7.50 plus GST for balance less than or equal to Rs 1,000, Rs 10 per month plus GST if average balance less than 50-75% of the required minimum amount and Rs 12 plus GST if balance falls below 75% of the minimum.

Rural Branch:

Required Minimum Balance per month- Rs 1,000
Fines levied upon breach – Rs 5 plus GST for balance less than or equal to Rs 500, Rs 20 per month plus GST if average balance less than 50-75% of the required minimum amount and Rs 12 plus GST if balance falls below 75% of the minimum.

The accounts exempt from the above fines are namely: Jan Dhan accounts, No-frills accounts, salary accounts, Pehla Kadam Pehli Udaan accounts, and all the pension accounts.
It is worth putting forth that many private banks also levy the same fine, although their fines and minimum amounts are quite high comparatively. For instance, a basic HDFC account requires its holder to keep a minimum of Rs 10,000 as the balance for urban areas and Rs 5,000 for semi-urban and Rs 2,500 for rural areas. The penalty-imposed ranges from Rs 150 to Rs 600 plus GST (in metro and urban areas) and from Rs 270 to Rs 450 plus GST (in rural areas).

Expert’s Take

The Firstpost talked to Devidas Tuljapurkar, Joint Secretary of the All India Employees Bank Association, who explicitly put the blame on the rising Non-Performing-Assets (NPAs) which as on March 31st 2018, were at Rs 8,45,475 crore rising from Rs 2,16,739 crore as on March 31st 2014 (as revealed by the MOS Finance in the Lok Sabha) and said that the fines were being charged as part of a recovery by banks.

He was quoted as, “On the one hand, the government says it wants more people to get into the formal banking system. On the other, banks discourage them by charging for not maintaining a certain balance. This is nothing but a cascading effect of rising bad loans.”

Also, to add, the SBI reported a loss of Rs 7,718 crores in the fourth quarter of 2017-18 and the reason attributed are the growing NPAs, which increased from 6.9% of the total loans in 2016-17 to 10.91% of the total loans in 2017-18, Firstpost stated.

Furthermore, he said, “The Rs 11,500 crores are obviously recovered from customers who belong to the salaried, lower middle class. Who would struggle to maintain the minimum balance? Certainly not the rich and elite.”

Also Read SBI Reports Net Loss Of Rs 7,718 Cr, Highest Ever In Its History


Written by : Anirudh Ganeshan (Guest Author)

Edited by : Shraddha Goled

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