The Reserve Bank of India (RBI) has clarified that the decision on the quantum of minimum average balance (MAB) in savings accounts lies solely with individual banks. Speaking at a financial inclusion event in Gujarat on Monday, RBI Governor Sanjay Malhotra stated that the issue does not fall under the central bank’s regulatory domain.
“The Reserve Bank of India has left it to the banks to decide the quantum of minimum average balance,” Malhotra said on the sidelines of the event. “Some banks have capped it at Rs 10,000, others at Rs 2,000, and some have done away with it altogether. This issue does not fall under the regulatory domain.”
The matter has drawn renewed attention following a report by ET that ICICI Bank has raised the MAB requirement for new customers in urban and metro areas to Rs 50,000, effective August 1. Customers who fail to maintain this balance will incur a penalty of 6% of the shortfall or Rs 500, whichever is lower.
This development comes at a time when several state-owned banks are moving in the opposite direction, eliminating penalties for not maintaining a minimum balance in an effort to promote financial inclusion.
State Bank of India was the first to eliminate penalties for non-maintenance of minimum balance, effectively allowing customers to access banking services without the burden of maintaining a balance. Over the past three months, Punjab National Bank, Canara Bank, and Indian Bank have followed suit, waiving penalties on savings account minimum balance requirements.
In contrast, most private sector banks continue to levy a charge, typically 6% of the shortfall in the required minimum average balance or Rs 500 per quarter, whichever is lower. Meanwhile, many banks have also reduced interest rates on savings deposits in recent months, aiming to protect their margins amid changing market dynamics.
“The Reserve Bank of India has left it to the banks to decide the quantum of minimum average balance,” Malhotra said on the sidelines of the event. “Some banks have capped it at Rs 10,000, others at Rs 2,000, and some have done away with it altogether. This issue does not fall under the regulatory domain.”
The matter has drawn renewed attention following a report by ET that ICICI Bank has raised the MAB requirement for new customers in urban and metro areas to Rs 50,000, effective August 1. Customers who fail to maintain this balance will incur a penalty of 6% of the shortfall or Rs 500, whichever is lower.
This development comes at a time when several state-owned banks are moving in the opposite direction, eliminating penalties for not maintaining a minimum balance in an effort to promote financial inclusion.
State Bank of India was the first to eliminate penalties for non-maintenance of minimum balance, effectively allowing customers to access banking services without the burden of maintaining a balance. Over the past three months, Punjab National Bank, Canara Bank, and Indian Bank have followed suit, waiving penalties on savings account minimum balance requirements.
In contrast, most private sector banks continue to levy a charge, typically 6% of the shortfall in the required minimum average balance or Rs 500 per quarter, whichever is lower. Meanwhile, many banks have also reduced interest rates on savings deposits in recent months, aiming to protect their margins amid changing market dynamics.
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