Banks Recover Rs10,000 Crore from Customers Not Maintaining Minimum Balance, Using ATMs More

Moneylife Digital Team 22 December 2018

Economy & Nation

Public sector banks (PSBs) have collected more than Rs10,000 crore over the past three years from customers as penalty for not maintaining minimum balance in saving bank account and as charges for additional transactions on automated teller machines (ATMs) beyond the permitted free transactions. This information was given in the Lok Sabha by Shiv Pratap Shukla, minister of state for finance.

Since this money recovered goes directly in to bank's net profit, bankers are reluctant to pay any heed to customer's woes on these charges.

As expected State Bank of India (SBI) tops the list of fines collected from its account holders. During FY2017-18, the state-run lender has collected Rs2,433.84 crore from customers for non-maintenance of monthly average balance in their accounts. During the current fiscal, till September 2018, SBI has recovered Rs459.88 crore from account holders.

The information given by the minister shows that 21 PSBs have collected Rs1,000 crore in the first six months of 2018-19 as charges for not maintaining minimum balance in saving accounts.

The minister told the Lok Sabha that as per Reserve Bank of India (RBI), as on March 2017, there were 150.21 crore savings account opened in scheduled commercial banks, out of which 53.30 crore were basic saving bank deposit accounts (BSBDA) and Jan-Dhan accounts. In short, the banks would have recovered penalty from nearly 97 crore account holders.

Similarly, these banks recovered more than Rs850 crore from customers for using ATMs more than the permissible number of times.

Mr Shukla, however does not feel that there is anything wrong in this. He says, "As appraised by PSBs, no savings account has been closed by banks for non-maintenance of minimum balance.”

Banks are permitted by the Reserve Bank to fix reasonable penal charges on non-maintenance of minimum balance as per their board approved policy, the minister said.

Earlier this year, stung by persistent criticisms customers and consumer organisations for levying exorbitant and unfair charges on people with modest means for failing to maintain minimum balance, SBI had reduced charges for non-maintenance of monthly average balance (MAB) in savings accounts. However, in an era of no-frills and Jan Dhan accounts, a mere reduction in charges is not the solution. All banks need to scrap these charges and change the nature of the account.

Moneylife Foundation has led a group of non-governmental organisations, economists, bank unions and activists, in raising voice against this practice of arbitrary charges. Our joint memorandum submitted to regulators, Finance Ministry and Parliamentary Standing Committee on Finance had come up with a simple solution: instead of levying charges for not maintaining minimum balance, bank should downgrade the customer's account to lower levels, like no-frills account.

"In the era of Jan Dhan account and zero balance accounts, the average minimum balance is an anachronism. Banks cannot be allowed to debit customer accounts under any circumstances. Banks are merely custodians of the money deposited with them. If a customer’s balance is low, then the bank can downgrade the account to a Zero Balance or No-Frills Account (and reduce services like chequebook facilities etc.). It cannot levy a charge. This is in line with international practices," the Memorandum submitted by us says.

Before April 2017, there were no charges levied on non-maintenance of minimum monthly average balance. SBI re-introduced the requirement last year and thus charges on savings bank account after a gap of six years.

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