HDFC Bank, Axis Bank, and ICICI Bank collected over ₹11,000 crore in minimum balance penalties from FY23 to FY26, exceeding the combined total of 12 public sector banks. While most public lenders have now stopped these charges to improve customer service, private banks continue to derive significant revenue from them. Investors should monitor how these fee structures influence customer acquisition and deposit growth.
Detailed Coverage
A recent review of banking data has highlighted a significant gap in how private and public sector banks manage service charges for savings accounts. Between fiscal years 2023 and 2026, three major private lenders—HDFC Bank, Axis Bank, and ICICI Bank—collected over ₹11,000 crore in penalties from customers failing to maintain their required minimum average balance. This total surpasses the aggregate penalty income of all 12 public sector banks (PSBs) combined, which stood at approximately ₹10,230 crore over the same three-year period.
HDFC Bank's Contribution to Fee Revenue
HDFC Bank emerged as the leader in this segment, accounting for ₹5,600 crore in penalty collections. This amount alone represents more than 55% of the total revenue gathered by all 12 public sector banks combined for similar charges. For investors, this revenue stream reflects a persistent difference in business models, where private lenders maintain structured charges as part of their service policies, whereas public sector lenders have recently shifted their approach toward broader financial inclusion.
Shift in Public Sector Banking Policies
Public sector banks have undergone a notable policy change regarding account charges. Data indicates that 10 of the 12 public sector banks have entirely discontinued penalty charges for non-maintenance of minimum average balances. The two remaining public banks have opted to rationalize their fee structures according to board-approved commercial guidelines. This strategic move is aimed at enhancing customer retention and supporting the government’s push for wider banking access. In contrast, private banks have largely maintained their existing fee frameworks, which remain compliant with current Reserve Bank of India (RBI) regulations.
Regulatory Context and Customer Protection
Under current RBI guidelines, banks are permitted to charge fees for failing to maintain minimum balances, provided these charges are transparent, reasonable, and based on the actual cost of providing the service. The regulator mandates that banks must notify customers through electronic means or letters before a penalty is applied, typically allowing for a grace period. It is also important to note that zero-balance accounts, such as Basic Savings Bank Deposit Accounts (BSBDAs) and those under the Pradhan Mantri Jan Dhan Yojana (PMJDY), remain exempt from these charges. Currently, there are about 73 crore such accounts in India that do not face minimum balance requirements.
As banks continue to balance fee-based income with the need to attract new retail deposits, investors should track whether the disparity in service charges affects deposit growth rates. While penalty income contributes to non-interest revenue, the long-term impact on customer loyalty and the competitive landscape between public and private lenders will remain a key monitorable for the banking sector.