Key Points
- Public sector banks, including Bank of Baroda, Canara Bank, Punjab National Bank, and Indian Bank, have abolished the minimum balance requirement for savings accounts.
- The Finance Ministry has urged banks to reconsider minimum balance norms as most services are now digital.
- State Bank of India (SBI) led the way by scrapping the rule in 2020 after criticism over penalty revenues.
- Private banks continue to enforce strict minimum balance rules, though exemptions exist for select account types.
- RBI reports show banks are shifting focus to fixed and certificate deposits, reducing reliance on low-cost savings accounts.
New Delhi: In a move set to benefit millions of Indian bank customers, several major public sector banks have decided to abolish the minimum balance requirement for savings accounts. This means customers will no longer face penalties for failing to maintain a fixed minimum amount in their accounts each month.
Which Banks Are Making the Change?
Leading government banks Bank of Baroda, Canara Bank, Punjab National Bank, and Indian Bank have already implemented the new rule, removing the stress of maintaining a minimum balance. The development follows a high-level meeting between the Finance Ministry and top bank officials, where the ministry questioned the need for such rules in an era dominated by online banking services.
What Is the Minimum Balance Rule?
Traditionally, banks required customers to keep a minimum amount in their savings accounts. Failing to do so led to penalty charges, which often added up to significant sums for banks. Public sector banks have historically been more lenient, while private banks enforce stricter minimum balance norms, with penalties for non-compliance.
SBI Set the Precedent
The State Bank of India (SBI), the country’s largest bank, abolished the minimum balance requirement in 2020 after an RTI revealed that income from penalties surpassed the bank’s profits. The move was widely welcomed and set a precedent for other banks to follow.
RBI’s Changing View: Shift to Fixed Deposits
According to the Reserve Bank of India’s Economic Stability Report, banks are increasingly relying on fixed deposits (FDs) and certificate deposits (CDs), which offer higher returns, rather than low-cost current and savings accounts. The report also noted a slowdown in the growth of deposits in these traditional accounts, prompting a rethink of old policies.
Policy Lessons from Jan Dhan Accounts
The experience with accounts opened under the Pradhan Mantri Jan Dhan Yojana (PMJDY) also influenced the policy shift. Initially, these zero-balance accounts saw little activity, but over time, balances grew as financial inclusion deepened. This demonstrated that customers could be trusted to maintain balances without punitive rules.
Private Bank Customers: No Relief Yet
While public sector banks are easing rules, private bank customers must still maintain minimum balances. However, there are exceptions for Jan Dhan and salary accounts, and for customers with substantial investments or fixed deposits linked to their accounts.
Table: Minimum Balance Requirements Across Indian Banks
| Bank Type | Minimum Balance Rule (2025) | Penalty for Non-compliance | Notable Exceptions |
|---|---|---|---|
| Public Sector Banks | Abolished in most major banks | No penalty | N/A |
| State Bank of India | Abolished since 2020 | No penalty | N/A |
| Private Sector Banks | Still enforced | Penalty applies | Jan Dhan, salary, high-value accounts |
What Should Customers Do Next?
- Check with your bank for the latest rules, as some smaller public sector banks may still be updating their policies.
- Private bank customers should continue to monitor their balances to avoid penalties, unless they qualify for exemptions.
- Consider fixed deposits for higher returns, as banks are shifting focus to these products.
The move to scrap minimum balance requirements marks a major shift in Indian banking, offering greater convenience and peace of mind to millions of account holders. As digital banking becomes the norm, customer-friendly policies like these are expected to become more widespread.
