SBI under pressure to lower minimum balance requirement

Under pressure from the public and the government, State Bank of India (SBI), the country's largest lender, is likely to slash the minimum average balance requirement for savings accounts by about 70 per cent from the present Rs3,000 for metros, Rs2,000 for semi-urban areas and Rs1,000 for rural areas.

The lender is also changing the requirement from monthly average balance to quarterly average balance.

The move follows revelations that the bank made Rs1,772 crore by imposing penalties for non-maintenance of minimum balance between April and November 2017.

Reports quoting sources said the negative news on the income generated on the fees has forced the bank to look at reducing the minimum balance requirement to around Rs1,000 but is yet to take a call.

Finance ministry data showed that the public sector lender made a windfall of Rs1,771.67 crore as penalty from customers for non-maintenance of monthly average balance in savings accounts in eight months of 2017-18 from April to November 2017.

Helped by the collections from the minimum balance SBI also managed to post a net profit of Rs1,581.55 crore in the quarter ended September 2017.

SBI had reduced the charges with effect from 1 October, following criticism.

''We brought it (minimum balance limit) back in April and we reviewed in October, now also we are in the process of reviewing it. It should happen very soon. We will do a comprehensive review," said Praveen Kumar Gupta, managing director, retail and digital, SBI.

SBI had defended the move saying, "On an average balance of Rs 3,000 in metro, SBI earns Rs6 only per month, whereas for a minimum balance of Rs1,000 in rural, bank earns Rs2 per month which is meagre when compared to the services offered and corresponding costs incurred by the bank (free cheque book, 8 free ATM transactions, free branch transactions),'' it had said in a statement .

Under special type of bank accounts such as Pensioners' Accounts, Social Welfare Benefits Accounts and Basic Savings Bank Accounts, SBI doesn't require the customer to maintain any specific monthly average balance.

SBI had unilaterally revised upwards the minimum balance requirement to Rs5,000 for metros and Rs3,000 for semi urban, in April last year. However, following public outcry SBI brought down the minimum balance requirement to Rs3,000 in metros, Rs2,000 in semi-urban areas and Rs1,000 in rural centres.

Minimum balance in metro areas: Rs3,000.

  • If the balance falls between Rs2,999 and Rs1,500, then the account holder will have to pay Rs30 as penalty;
  • Balance between Rs1,499 and Rs750 will attract penalty of Rs40; while
  • Balance below Rs750 would attract fine of Rs50.
  • Prior to October 2017, the penalties for these three stages were Rs50, Rs75 and Rs100, respectively.

Minimum balance in semi-urban areas:  Rs2,000

  • Balance between Rs1,999 and Rs1,000 will attract a fine of Rs20;
  • For balance between Rs999 and Rs500 the fine is Rs30; while
  • For balance less than Rs500 the fine is Rs40.
  • Minimum balance in Rural areas: Rs1,000

Minimum balance in rural areas: Rs1,000

  • For balance between Rs999 and Rs500 the fine is Rs20
  • Balance between Rs499 and Rs250 will attract a fine of Rs30
  • Balance of Rs249 or less will attract a fine of Rs40.