The Committee on Petitions has recommended that public sector banks (PSBs) and private sector banks (PvSBs) should encourage accumulation of higher balances through incentives such as reward points, fee waivers, and higher interest rate for customers maintaining consistent deposits.
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Banks should adopt a “positive reinforcement approach” to encourage customers to maintain higher balances in savings bank (SB) accounts instead of penalising them for not maintaining minimum balance, according to a Parliament Committee.
The Committee on Petitions has recommended that public sector banks (PSBs) and private sector banks (PvSBs) should encourage accumulation of higher balances through incentives such as reward points, fee waivers, and higher interest rate for customers maintaining consistent deposits.
The panel is of the view that this positive reinforcement approach is more compatible with financial inclusion.
After carefully evaluating the fine balance between the autonomy given to banks and the interest of account holders, especially those belonging to the economically vulnerable sections of the society, the Committee proposed that all banks — whether private sector or public sector — should adopt a uniform policy of not charging penalties for failure to maintain minimum balance in all regular savings bank accounts.
In this regard, the Department of Financial Services (DFS) and the Reserve Bank of India (RBI) may consider issuing necessary guidelines to all banks, including Cooperative Banks and Regional Rural Banks (RRBs).
The 15-member Committee, chaired by Chandra Prakash Joshi, Member of Parliament (BJP) from Chittorgarh, Rajasthan, underscored that although most PSBs have decided to waive the minimum SB account balance charges, leading PvSBs have not followed suit. It noted that no direction or guideline on the subject has been issued by the RBI in this regard so far.
Penalty waiver: SBI leads the way
The panel highlighted the case of State Bank of India (SBI), which was the first among the major PSBs to waive charges for non-maintenance of minimum balance with effect from March 11, 2020.
In its reply to the Committee, SBI said: “MAB (monthly average balance) charges were waived to improve customer service standard, to encourage saving habit among small customers and incentivise customers to stay with SBI.”
While the aforementioned move impacted short-term profitability, it has been beneficial for the Bank in the long-run by improving customer satisfaction, thereby attracting more customers and potentially increasing overall business.
The Committee noted that SBI offset the loss of revenue on account of waiver of charges for non-maintenance of minimum balance in SB accounts through cost reduction via digital push and migrating customers to digital channels, acquiring more customers and increasing business level. SBI’s revenue almost doubled and net profit increased more than three times since 2020.
Following SBI’s footsteps, most of the PSBs, including Canara Bank, Punjab National Bank, Bank of India, Union Bank of India, Central Bank of India and Bank of Baroda, have waived charges for non-maintenance of minimum balance in all kinds of savings accounts.
According to the information provided by the Department of Financial Services to the Committee, the remaining PSBs are also exploring the possibility of removing the penalty.
Small entrepreneurs need customised current account
The Committee suggested that all PSBs and PvSBs may consider the feasibility of offering a customised current account product, especially for the use of small entrepreneurs. This is to ensure that the entrepreneurs’ capital and savings are not diminished by penalties and their involvement with the bank is fruitful in the growth of their business.
It noted that micro-entrepreneurs, self-employed individuals and small traders maintain current accounts which typically do not offer interest and carry higher minimum balance requirements compared to savings accounts.
The panel observed that for individuals or small entrepreneurs whose business income is low, seasonal, or inconsistent, maintaining such balances may be challenging. It cautioned that repeated penalties for not maintaining sufficient balance, combined with the absence of interest accrual can significantly erode the working capital of small entrepreneurs, which may inhibit business growth.
Published on February 17, 2026
