Chidambaram Welcomes Waiver of Minimum Balance Rule by Leading Banks: Calls It a Win for Customers
Major banks scrap penalties after years of backlash, ending a practice that generated hundreds of crores in fees.
Chidambaram Applauds End of Minimum Balance Requirement
Former Finance Minister P. Chidambaram has praised the decision by several top Indian banks to waive minimum balance requirements for savings accounts.
- He labeled the rule “obnoxious” and criticized banks for earning hundreds of crores annually through penalties imposed on customers for non-maintenance of minimum balance.
- Chidambaram highlighted that this long-standing practice persisted despite repeated appeals from account holders and had pushed customers to explore alternatives outside the traditional banking system.
Background: Growing Criticism and Economic Pressures
Over recent years, savings account holders have voiced strong opposition to the minimum balance policy, terming it unfair and burdensome.
- Banks were often seen as unresponsive to these complaints, even as penalties continued to add up.
- According to Chidambaram, it was economic realities—rather than customer requests—that finally prompted banks to remove the requirement.
- The change, he noted, signifies a victory for customer interests as economic logic succeeded where public demand could not.
Which Banks Have Removed Minimum Balance Rules?
Several leading banks have rolled out minimum balance waivers in recent weeks:
- Indian Bank recently announced a waiver for all account holders, aiming to enhance financial accessibility.
- Punjab National Bank and Bank of Baroda followed suit, scrapping penalty charges for non-maintenance of minimum average balance starting July 1.
- Canara Bank became the first major PSU bank to introduce such a policy last month.
- Notably, State Bank of India set the trend during the COVID-19 pandemic by waiving minimum balance requirements back in 2020.
How Did the Minimum Balance Rule Work?
Under the earlier system, banks—guided by the Reserve Bank of India’s framework—required customers to maintain an average monthly balance in their savings accounts.
- Falling below the specified threshold resulted in penalty charges, with amounts varying by bank and account type.
- The policy generated significant revenue for banks but was widely criticized as punitive and exclusionary.
Why the Change Matters
- Waiving minimum balance requirements makes banking more inclusive and affordable for millions of Indians, especially low-income and rural customers.
- The move may also restore trust and encourage more people to utilize banking services, furthering the government’s financial inclusion goals.
- It marks a shift towards customer-centric banking, putting an end to a controversial revenue stream.
