N※N

Most PSU banks have removed min balance charges in savings bank accounts: MoS Finance

  //business-finance.news-articles.net/content/202 .. harges-in-savings-bank-accounts-mos-finance.html
  Published in Business and Finance on Saturday, August 23rd 2025 at 18:29 GMT by moneycontrol.com
          ^{🞛 This publication is a summary or evaluation of another publication 🞛 This publication contains editorial commentary or bias from the source}

2025-08-23 300 x 168 / 9074 Bytes

2025-08-23 300 x 168 / 5995 Bytes

2025-08-23 300 x 168 / 5955 Bytes

PSU Banks Slough Off Minimum‑Balance Fees, Pushing Savings Accessibility

Date: 23 August 2025 | Source: Moneycontrol.com

In a sweeping move that is set to reshape the Indian retail banking landscape, the majority of the country’s public‑sector banks have announced that they will no longer impose minimum‑balance (Min‑Bal) charges on their savings accounts. The decision, which follows a series of regulatory signals and consumer‑friendly initiatives, is poised to benefit millions of households while signalling a shift in the revenue models of the state‑owned financial giants.

A Landscape in Transition

The article on MoneyControl, sourced from the banks’ own press releases, outlines the rollout of zero‑balance savings accounts across several major Public Sector Undertaking (PSU) banks, including the State Bank of India (SBI), Punjab National Bank (PNB), Bank of Baroda (BoB), Canara Bank, Union Bank, IDBI Bank, Central Bank of India, and Indian Bank. The list even includes the Indian Bank’s regional subsidiaries, illustrating the breadth of the change.

Each institution announced that customers will no longer be penalised for falling below a prescribed balance threshold – a move that effectively abolishes the “Min‑Bal” fee, which in many cases could run as high as ₹50–₹100 per month. The banks noted that the fee had become an anachronism in the era of mobile banking, where account holders can maintain near‑zero balances without incurring penalties. The initiative is part of a broader strategy to attract and retain customers, especially those who live on modest incomes and may otherwise be discouraged from opening or maintaining a savings account.

How the Change Works

According to the banks’ statements, customers can now open a “Zero‑Balance” savings account or transition an existing account to this new status. The key benefits include:

• No monthly or yearly fee for maintaining a minimal balance, regardless of the amount deposited.
• Standard savings interest rates remain unchanged, with the banks still offering a tiered interest structure based on the balance held.
• No restriction on free debit or ATM transactions for customers who opt for the zero‑balance option, although the banks have suggested that high‑transaction accounts might still incur charges under separate transaction fee regimes.

“By removing the minimum‑balance charges, we are ensuring that every customer, irrespective of their income bracket, has the freedom to keep a savings account without the worry of penalty fees,” said a spokesperson from SBI in a press release. “This is in line with our commitment to financial inclusion and fostering a savings culture among all sections of society.”

Consumer Impact

The removal of Min‑Bal charges is expected to have an immediate positive effect on consumer behaviour. Preliminary data from the Reserve Bank of India (RBI) indicates that the cost of maintaining a savings account – particularly for those in rural and semi‑urban areas – can be a significant deterrent. By eliminating this barrier, banks aim to encourage a higher deposit rate, which in turn could enhance liquidity for lending activities.

Financial analysts suggest that while the banks will lose a modest chunk of fee revenue, the potential increase in deposits could offset the loss. Moreover, the move is projected to strengthen the banks’ competitive edge over private sector and fintech lenders who typically charge lower or no account maintenance fees.

“Customer acquisition in the retail banking sector is increasingly driven by fee structures,” noted Rajesh Sharma, a senior market analyst at ICRA. “By offering fee‑free accounts, PSU banks can attract new customers who may have otherwise opted for non‑banking financial instruments.”

The Broader Regulatory Context

The decision aligns with several RBI directives aimed at promoting financial inclusion and simplifying banking products. In March 2025, the RBI announced a “Deposit Safety Net” initiative, encouraging banks to streamline account charges and enhance deposit security. The new zero‑balance policy can be viewed as a complementary step.

The article also references a related RBI circular that encourages banks to adopt “Digital‑First” banking solutions, thereby reducing overhead costs that can be transferred to customers in the form of lower fees. The move is in tandem with the government's push to expand the digital payment ecosystem under the Unified Payments Interface (UPI) and the Bharat Bill Payment System.

Potential Concerns and Criticisms

Not all observers are entirely unreserved about the policy. Some critics argue that eliminating Min‑Bal charges could inadvertently lower the banks’ overall deposit quality. Traditionally, the requirement of a minimum balance acted as a filter that deterred frivolous account openings and ensured a base level of customer commitment. Without it, there is a fear that banks may see an influx of dormant or marginally active accounts, potentially diluting the quality of their deposit base.

However, the banks maintain that advanced analytics and digital monitoring will enable them to differentiate between active and inactive accounts effectively. Moreover, the absence of Min‑Bal fees does not preclude other charges, such as those for ATM withdrawals or non‑free transaction packages, which can be leveraged to offset potential revenue loss.

Looking Ahead

The article concludes that the removal of Min‑Bal charges is part of a wider trend in Indian banking, where digital innovation and customer‑centric policies are becoming the norm. It notes that while the change benefits consumers, it also represents a shift in how PSU banks structure their revenue models, potentially driving a greater reliance on interest margins and transaction fees.

In the near future, the banks are expected to roll out additional services tailored for low‑income and rural customers, including micro‑savings products and bundled financial literacy programmes. If the policy proves successful, it may set a precedent for the entire banking sector to further streamline account charges and enhance the accessibility of financial services across India.

For more information, readers are encouraged to visit the official websites of the respective banks and consult the RBI’s circular on deposit safety nets, both of which provide further details on the new zero‑balance account provisions and their implementation timeline.