Banks Scrap Minimum Balance Fees, Draw Praise from Chidambaram: Former Minister Points Out Annual Profits in Billions
In a significant move aimed at making banking more accessible for all, several major public sector banks in India have waived the minimum balance requirement for savings accounts. This decision eliminates penalties for failing to maintain the minimum monthly average balance.
The key banks that have implemented this policy include Indian Bank, Punjab National Bank (PNB), Bank of Baroda, and Canara Bank. Indian Bank waived the minimum balance requirement for all account holders from Monday, July 2025, while PNB and Bank of Baroda will remove the penalty charge for not maintaining a minimum average balance from July 1. Canara Bank was the first among public sector banks to waive the minimum balance rule, implementing the policy last month.
State Bank of India (SBI) was one of the early adopters, having already waived the minimum balance requirement amid the COVID-19 pandemic in 2020. This policy has continued.
Former Finance Minister P Chidambaram hailed these changes, exulting that "economics has achieved what could not be done by reason," referring to the banks' decision to waive the minimum balance requirement. The minimum balance rule, which had been a source of complaints from savings account holders, had persisted despite requests from customers.
Banks levy a penalty if the funds fall below the required threshold, with amounts varying based on the type of savings account. Some Indian banks had earned 'hundreds of crores' of rupees annually from penalties associated with the minimum balance rule.
In the last few years, some customers have sought alternatives and looked beyond banks for other avenues to place their savings, as the minimum balance rule had been a barrier for many. The Reserve Bank of India provides regulatory framework and guidelines for banks to implement the minimum balance rule.
These changes are part of efforts by public sector banks to remain competitive amid a slowdown in low-cost savings and current account deposits. By waiving the minimum balance requirement, banks aim to make banking more accessible, especially for lower-income groups.
The policy of waiving the minimum balance requirement for savings accounts has been implemented by several public sector banks, including Indian Bank, Punjab National Bank (PNB), Bank of Baroda, and Canara Bank. State Bank of India (SBI) was an early adopter, having already implemented this policy during the COVID-19 pandemic in 2020. Former Finance Minister P Chidambaram applauded these changes, stating that "economics has achieved what could not be done by reason," referring to the banks' decision to eliminate the minimum balance requirement. Additionally, these changes aim to make banking more accessible, particularly for lower-income groups, as customers seek alternatives to banks due to the minimum balance rule serving as a barrier for many.
