Public sector banks in India are rethinking the mandatory minimum balance requirement for savings accounts. Several major banks, including Canara Bank, Bank of Baroda, Punjab National Bank, and Indian Bank, have already waived penalties for non-maintenance of the prescribed minimum balance—signaling a shift in banking strategy.
What Triggered the Change?
The decision comes after discussions with the finance ministry, which questioned the logic of penalising customers—especially when current and savings account (CASA) deposits are losing share in total bank deposits. The Reserve Bank of India (RBI), in its recent Financial Stability Report, flagged that banks’ liability structures are shifting toward higher-cost term deposits and Certificates of Deposit (CDs).
SBI Set the Precedent
The State Bank of India (SBI) scrapped its minimum balance requirement in 2020 after public backlash. An RTI had revealed that charges collected for non-maintenance of balances exceeded SBI’s net profit, drawing criticism from both customers and policymakers.
This set the tone for other public sector banks to re-evaluate similar policies.
Jan Dhan Accounts Influence Policy
The policy shift is also inspired by data from Jan Dhan accounts. While these zero-balance accounts were initially dormant, balances have grown steadily over time, showing that customers do save, even without a penalty structure. This experience appears to have positively influenced the decision to remove the punitive approach.
Digital Banking Reduces Operational Costs
Traditionally, banks justified minimum balance requirements by claiming they helped subsidize free banking services. However, with the rise in digital banking, operational costs have come down. Now, banks are focusing on alternative revenue models—including debit card fees, and charges for exceeding transaction limits—to maintain profitability without burdening customers.
Private Banks Still Use Relationship-Based Models
While public banks are easing restrictions, private banks continue to impose minimum balance requirements—with exceptions for salary accounts and high net-worth individuals who meet ‘relationship value’ thresholds, including investments in FDs and mutual funds.
