Ailing Indian banks shore up on fees from non-maintenance of minimum balance

State Bank of India led the pack in collecting customer penalties.

A total of 21 public sector banks and three major private lenders in India have collected around $729.64m (Rs 5,000 crore) from customers that failed to maintain minimum balances in their accounts for 2017-18, reports The New Indian Express. 

Also read: India needs to trim its bloated banking sector

Government-owned State Bank of India led its peers in collecting the largest amount of fees from non-compliant customers after collecting nearly half of the total at Rs 4,989.55 crore. 

SBI customers holding savings bank accounts with the bank's ‘metro’ and ‘urban’ branches are required to maintain a monthly average balance (MAB) of $43.72 (INR 3,000) whilst those in ‘semi-urban’ and ‘rural’ are required to maintain MAB of $29.15 (INR 2,000) and $14.57 (INR 1,000) respectively.

HDFC Bank followed closely after charging its customers around Rs 590.84 crore. Axis Bank collected Rs 530.12 crore in the last fiscal while ICICI Bank charged Rs 317.6 crore.

Central bank rules allow lenders to levy miscellaneous charges on customers. However, customers opening accounts under the Basic Savings Bank Deposit (BSBD) scheme and Pradhan Mantri Jan Dhan Yojna are not required to maintain any minimum balance.

Also read: Can Indian banks weather the last wave of bad loan resolution?

Fees from customer penalties allowed India's embattled banks to book lesser losses from its ballooning bad debt burden and a dismal recovery rate for defaulted loans that stands at 26%. 

Photo from Manjul Kumar - Photographed by me, CC0