Lok Sabha panel urges banks to scrap penalties on minimum balance rule

In what could be a big relief to customers, a Lok Sabha committee has recommended that banks stop levying penalties on customers for failing to maintain the minimum balance in savings accounts. 

The Committee on Petitions of the Lok Sabha, in its fourth report presented on Thursday, recommended that the Ministry of Finance (Department of Financial Services) and the Reserve Bank of India (RBI) consider ensuring that all banks, whether in the public or private sector, adopt a uniform policy of not charging such penalties in regular savings accounts. 

Instead of imposing penalties, the panel suggested that banks encourage customers to maintain higher balances through incentives such as reward points, fee waivers and interest rate benefits for consistent deposits. 

 

If implemented, this would mark a shift from the current policy that allows banks to decide their own minimum balance requirements for savings accounts. Some banks and schemes, such as Jan Dhan accounts, do not require customers to maintain a minimum balance. However, several banks, particularly private lenders, impose penalties if customers fail to maintain the required average monthly balance. The requirement typically ranges from ₹2,000 to ₹25,000. 

The report also called for greater transparency in the disclosure of all the charges imposed by the banks on customers. It recommended that banks simplify account opening forms, brochures, mobile apps and branch notice boards to prominently display all applicable charges. 

These include fees linked to minimum balance requirements, ATM usage, SMS alerts and digital transactions, the report said. It further added that the banks should provide a “fee/penalty disclosure sheet” at the time of account opening in English, Hindi and regional languages, summarising all fees, charges, penalties, minimum balance rules and transaction limits. 

On customer service, the Committee recommended that banks strengthen financial literacy initiatives and put in place a time-bound grievance redressal system. It said customer complaints should ideally be resolved within three working days and in no case take more than seven working days. Banks were also advised to introduce simplified complaint-filing channels through SMS and phone calls to assist low-literacy and rural users who may not be comfortable with digital platforms.