Banks not to levy minimum balance penalty on pension account holders: HC

Collection of penalty would defeat the purpose of old-age pension scheme, argued the petitioner

The Madras High Court on Friday restrained banks from levying penalty for not maintaining the minimum balance in the accounts in which the monthly old-age pension amount was being credited.

A Bench of Chief Justice Indira Banerjee and Justice Nisha Bhanu gave the interim order at the Madurai Bench of the court on a public interest litigation filed by advocate S Louis, who sought exemption of the minimum balance criteria for the accounts in which old-age pension amount is credited.

It ordered the Reserve Bank of India, the State Bank of India (SBI) and the Union joint finance secretary among others to file their response and posted the matter for hearing after two weeks.

The petitioner had submitted that the collection of penalty in such cases would defeat the purpose of the old-age pension scheme, which was aimed at helping people aged 65 and above who did not have financial support and to those suffering from certain conditions such as physical and mental challenges.

Citing an example, he said the Alangulam branch of the State Bank of India deducted Rs 350 as penalty from the pension amount of Rs 1,000 of a 75-year old woman for not maintaining minimum balance.

The petitioner said he wrote to the branch manager to stop the practice of deducting money from the old-age pensioners’ accounts. But there was no response.

The old-age pensioners were operating bank accounts to receive the monthly pension amount.

Under such circumstances, it was not fair to ask the account holders to maintain a minimum balance.

If Rs 350 was deducted from such account, it would defeat the purpose of the scheme itself. The SBI had claimed that it had collected Rs 235.06 crore as penalty from 388.74 lakh account holders who did not maintain the minimum balance.

In all fairness, the amount collected as penalty from the old-age pensioners should be deposited back in their accounts.

He urged the court to intervene and direct the Reserve Bank of India, the Social Welfare Secretary, chairman of the SBI among others to exempt the minimum balance criteria to the accounts of old-age pensioners in the nationalised banks.

As an alternative, they should provide minimum balance once and for all to such accounts enabling the pensioners to receive the full pension amount without any deduction.