New Delhi – Aam Aadmi Party (AAP) Rajya Sabha MP Raghav Chadha has strongly asked the government to remove penalties that banks charge when customers do not keep the required minimum balance in their savings accounts. He raised this during the discussion on the Appropriation Bill, 2026 in the Rajya Sabha. Chadha said these charges act like a hidden tax on poor people and hit the weakest the most.
He shared figures from Lok Sabha data showing that banks collected around ₹19,000 crore over the last three financial years (FY 2022-23 to FY 2024-25) through such penalties. Public sector banks took about ₹8,000 crore, while private banks collected around ₹11,000 crore. In the latest year, FY 2024-25 alone, banks earned ₹4,818 crore from these fines. Private banks like HDFC Bank, Axis Bank, and ICICI Bank were among the top collectors, while public sector ones like Punjab National Bank (PNB) and others also earned a lot.
Chadha said these penalties hurt farmers, pensioners, daily wage workers, and small savers who put money in banks for safety, not to earn interest or for big transactions. He called it a “quiet tax on poverty” because poor people face fines just for being poor. He pointed out that while Jan Dhan and basic savings accounts are zero-balance and free from such charges, many regular savings accounts still demand ₹1,000 to ₹10,000 minimum balance, and failing that leads to penalties.
During his speech, Chadha said, “I propose ending minimum balance penalties so the banking system stops charging people for their poverty.” He added that the poor keep money in banks for safety, not to be quietly fined for being poor. He urged the government to scrap these charges completely to make banking truly inclusive and supportive for common people.
Why Minimum Balance Penalties Exist and How They Work
Banks charge penalties for not maintaining minimum average balance (MAB) to cover operational costs and encourage disciplined saving. The Reserve Bank of India (RBI) allows banks to set their own rules for this. Penalties can be a fixed amount or a percentage of the shortfall, often ₹100 to ₹500 per month or more, depending on the bank and account type.
Many banks like SBI, PNB, HDFC, Axis, and others have different slabs. For example, metro branches may require higher balances than rural ones. If the balance falls short for even one month, the penalty is deducted automatically. This hits hardest those with irregular income, like labourers or small farmers, who may withdraw money for emergencies and then get fined.
Chadha highlighted that these charges add to the financial stress of ordinary Indians. He said banks should not punish people for low savings when the goal of financial inclusion is to bring everyone into the banking system without extra burden.
Data from Parliament and Recent Collections
The figures Chadha quoted come from answers given by the Finance Ministry in Parliament. In FY 2024-25, private banks led with higher collections, showing ₹4,818 crore total from minimum balance penalties across the industry. Over three years, the total reached nearly ₹19,000 crore, with private banks taking a bigger share.
Earlier data from 2020-21 to 2024-25 showed public sector banks alone collected over ₹8,621 crore to ₹8,936 crore in penalties. Top public banks included Indian Bank (₹1,828 crore over five years), PNB (₹1,662 crore), and Bank of Baroda (over ₹1,500 crore). Private leaders were HDFC, Axis, and ICICI.
A parliamentary committee on petitions has also flagged this issue and suggested banks do away with such penalties because they burden the poor unfairly.
Zero-Balance Accounts and Existing Waivers
India has pushed financial inclusion through Pradhan Mantri Jan Dhan Yojana (PMJDY), which offers zero-balance accounts with no penalties for low balance. These accounts give basic services like free ATM use (limited), no cheque book charges in many cases, and overdraft facility up to ₹10,000 for eligible people.
RBI also directs banks to offer Basic Savings Bank Deposit (BSBD) accounts without minimum balance requirement. Recent RBI updates for 2026 will make BSBD rules stronger from April 1, 2026, with more free services, easier account opening, and better choice for customers.
Some banks have already waived penalties on regular savings accounts. For example, State Bank of India waived them since March 2020 in many cases, and others like Indian Bank did so from July 2025. But many banks still charge on non-basic accounts.
Chadha’s point is that even with zero-balance options, millions use regular accounts and face these fines. He wants a full waiver across the board so no one gets penalized for low balance.
Chadha’s Broader Points in the Debate
In the same Rajya Sabha discussion, Chadha raised two other issues for common people. He asked for optional joint income tax filing for married couples to ease tax burden on families. He also demanded full tax exemption on disability pensions for armed forces personnel who get injured in service.
He said these are practical reforms to reduce everyday anxieties of Indians, not to oppose the government but to suggest fair changes. His speech on bank penalties got a lot of attention online, with many people sharing stories of facing such charges.
Reactions and What Happens Next
Many people on social media supported Chadha’s call. They shared how penalties hurt middle-class and poor families. Some said banks treat small savers harshly while big defaulters get loan waivers or restructuring.
The government has not yet replied directly to Chadha’s proposal in the debate. Finance Ministry earlier said there is no blanket order to waive penalties in public sector banks, but individual banks can decide.
RBI has not changed rules to ban minimum balance penalties but keeps pushing for better inclusion through BSBD accounts. The new 2026 norms for BSBD will start soon and may reduce the problem for many.
Chadha’s demand has sparked fresh talk on making banking fairer. If more MPs or committees push this, it could lead to policy changes or more banks waiving fees.
Road Ahead for Financial Inclusion
Financial inclusion means everyone should have access to safe banking without extra costs. PMJDY has opened crores of accounts, but hidden charges like minimum balance penalties can push people away or make them lose trust.
Chadha’s speech reminds that true inclusion needs not just accounts but also protection from fines that hit the poor hardest. As India moves towards digital and inclusive banking, removing such penalties could be a big step.
FAQs
Q1. What did Raghav Chadha say about bank penalties?
He called them a “quiet tax on poverty” and asked to end them completely. He said banks collected nearly ₹19,000 crore in three years from poor customers who could not keep minimum balance. He wants the system to stop fining people for being poor.
Q2. How much did banks collect from minimum balance penalties?
Over FY 2022-23 to FY 2024-25, around ₹19,000 crore total. Public sector banks took about ₹8,000 crore, private banks ₹11,000 crore. In FY 2024-25 alone, ₹4,818 crore was collected.
Q3. Which banks collected the most?
Private banks like HDFC, Axis, ICICI led in recent years. Public banks like PNB, Indian Bank, Bank of Baroda also collected high amounts over longer periods.
Q4. Why do banks charge minimum balance penalties?
To cover costs of maintaining accounts and encourage people to save regularly. RBI allows it, but many say it hurts inclusion for low-income groups.
Q5. Are there accounts without these penalties?
Yes, PMJDY Jan Dhan and BSBD accounts are zero-balance with no penalties. RBI’s new 2026 rules will make BSBD better with more free services from April 1, 2026.
Q6. Has the government responded to Chadha’s demand?
Not yet in the debate. Finance Ministry said no blanket waiver order exists, but banks can decide themselves. Some banks have waived on their own.
Q7. What other issues did Chadha raise?
Joint tax filing for couples and full tax exemption on disability pensions for soldiers.
Q8. Will penalties stop soon?
Not immediately, but pressure from Parliament and committees may lead to changes. More banks are waiving, and RBI focuses on zero-balance options.