Major banks have mopped up over Rs 35,000 crore as penal charges in the five years since 2018 for non-maintenance of minimum balance, additional ATM transactions and SMS services.

The largest amount of Rs 21,044.4 crore has come on account of non-maintenance of minimum balance, Minister of State for Finance Bhagwat Karad told Rajya Sabha in a written reply. He was referring to public sector banks and five leading private sector banks including HDFC Bank, ICICI Bank, Axis Bank, IDBI Bank and IndusInd Bank.  

While Rs 8,289.32 crore was collected for ATM transactions beyond free numbers, SMS charges accounted for Rs 6,254.32 crore.

Customers are levied charges by banks for non-maintainance of minimum balance in an account, use of ATMs beyond free transactions, depositing cash beyond a limit, among others. 

Maintaining minimum balance is the amount a customer is required to maintain in his/her account every month. This varies from metro to small cities and to rural areas. The figure is calculated at the end of each month and failure to maintain this balance results in penalties.

The average monthly balance (AMB) in case of various banks ranges between Rs 3,000 to Rs 10,000 in metros, Rs 2,000-Rs 5,000 in urban areas and Rs 500-Rs 1,000 in rural areas. Non-maintenance could lead to levy of charges ranging between Rs 400-Rs 500. 

Some private banks also levy cash transaction charges for such accounts of Rs 100-125 per transaction over and above the non–maintenance of AMB charges.

As per an RBI circular, banks are allowed to fix penal charges for non-maintenance of minimum balance in savings account according to their board approved policy.  Coming into effect from 1 April 2015, such charges have to be reasonable and should not fall out of line with the average cost of providing the services. 

The Reserve Bank has also advised banks to ensure reasonableness and equity in the charges levied by banks for sending SMS alerts to customers and to leverage the technology available with them and the telecom service providers to ensure that such charges are levied on all customers on actual usage basis.

According to the Reserve Bank of India circular of 10 June 2021, bank customers are eligible for five free transactions (inclusive of financial and non-financial transactions) every month from their own bank ATMs. They are also eligible for fixed number of free transactions (inclusive of financial and non-financial transactions) from other bank ATMs viz. three transactions in metro centres and five transactions in non-metro centres. Beyond the free transactions, charges are levied for each ATM transactions at a maximum of Rs 21 per transaction. This has come into effect from 1 January 2022.

However, there is no requirement for maintaining minimum balance in the accounts opened under Pradhan Mantri Jan Dhan Yojna and for Basic Savings Bank Deposit Account. At the same time, for these accounts, there is no no limit on number and value of deposits that can be made in a month. However, withdrawal, including ATM ones, are limited to four in a month.