Indian banks collected nearly Rs 7,100 crore in penalties from customers for failing to maintain minimum average balance (MAB) requirements during FY26, up from around Rs 6,800 crore a year earlier, according to data compiled from bank disclosures. Private sector banks accounted for close to 70% of the total, collecting roughly Rs 4,948 crore, with HDFC Bank alone contributing nearly Rs 1,800 crore, followed by Axis Bank at Rs 1,081 crore.
The year-on-year rise, a roughly 17% increase in MAB penalty collections among private banks, comes even as several lenders have periodically revised minimum balance thresholds and penalty structures across savings account categories.
Why Are MAB Penalty Collections Rising Despite Digital Banking Growth?
Banking analysts point to two contributing factors: continued growth in the sheer number of savings accounts, including many opened under financial inclusion drives that carry lower balance thresholds but still attract penalties for non-compliance, and limited customer awareness of exact MAB requirements, which vary by account type, branch location and bank. Private banks, which generally impose higher minimum balance thresholds than public sector banks, have consequently generated a disproportionate share of total penalty collections.
The data underscores a persistent revenue stream for banks even as digital transactions have reduced the operational cost of maintaining low-balance accounts, raising questions from consumer advocates about whether MAB penalty structures remain proportionate to the actual cost of servicing such accounts.
What Do Banking Analysts and Consumer Groups Say?
Consumer advocacy groups have periodically petitioned the Reserve Bank of India to cap or standardise MAB penalty charges, arguing that customers in lower-income brackets are disproportionately affected. Banking sector analysts, meanwhile, note that MAB penalties remain a legitimate, RBI-permitted fee category, but the scale of collections, nearing Rs 7,100 crore across the industry in FY26, has renewed scrutiny on whether disclosure of minimum balance requirements is sufficiently transparent at account opening.
Market and Trade Reaction
Private banks with the highest MAB collections have faced renewed public commentary on social media and in financial press, though there has been no indication of an imminent regulatory cap. Public sector banks, which generally maintain lower minimum balance thresholds, continued to account for a smaller share of total penalty revenue in FY26 compared to their private peers.
What Happens Next?
Absent a formal RBI directive, MAB penalty structures are expected to remain within individual banks’ discretion, though continued public scrutiny could prompt voluntary threshold revisions at some lenders. Customers are advised to verify current MAB requirements directly with their bank, as thresholds differ by account type and branch category.
Frequently Asked Questions
How much did Indian banks collect in MAB penalties in FY26?
Banks collected nearly Rs 7,100 crore in minimum average balance penalties during FY26, up from about Rs 6,800 crore in the previous fiscal year.
Which bank collected the highest MAB penalty amount?
HDFC Bank collected the highest amount among private banks at nearly Rs 1,800 crore, followed by Axis Bank at Rs 1,081 crore.
Why do private banks collect more MAB penalties than public sector banks?
Private banks generally impose higher minimum balance thresholds than public sector banks, resulting in a larger share, nearly 70%, of total industry MAB penalty collections.
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