Banking News


Penal Charges for non-maintenance of minimum balance


RBI has directed banks not to levy penal charges for non-maintenance of minimum balance in inoperative accounts. 


RBI had already clarified that no penalty should be levied for non-operation/ activation of  Basic Savings Deposit Accounts (BSBD) or what were called no-frill accounts. 

The position in some banks was that if you did not operate your account with a small balance for a few years, the bank charges would eat up whatever balance you had.  Since banks cannot claim that inoperative accounts impose huge operational costs on them, some relief from RBI was called for. 

That said, banking is a funny business. Its purpose is to monetise the economy but the business itself operates under a barter system. You are not charged for each service, such as deposits and withdrawals in your account. Instead, it is expected that the essential services would be free and the bank would be recompensed by using the (minimum) balance in your account. For the smaller banks or those with low CASA deposits the minimum balance is critical. Larger banks like SBI can afford to waive the penalty for non-maintenance of minimum balance. But if there is to be one rule for the industry, it is better that minimum balance requirement is waived and depositors are charged for the number and value of transactions above an agreed minimum. If minimum balance penalty is waived, banks will still ensure their profits by charging the customer in some other form.



http://rbi.org.in/scripts/BS_CircularIndexDisplay.aspx?Id=8867
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