Beena Parmar Moneycontrol News

State Bank of India, the country's largest bank, is likely to slash by about 70 percent minimum average balance requirement, which at present is at Rs 3,000 for metros, Rs 2,000 for semi-urban areas and Rs 1,000 for rural areas. It also plans to change the mandate to quarterly balance from monthly requirement.

According to sources, after the negative news on the income generated on the fees, the bank is looking at reducing the minimum balance requirement to around Rs 1,000 but is yet to take a call.

SBI saw backlash after finance ministry data showed that the public sector lender netted a windfall of Rs 1,771.67 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.

The lender, also among top 50 global banks now, had posted a net profit of Rs 1,581.55 crore in the quarter ended September 2017.

SBI has close to 40.5 crore savings account customers.

From April 1, 2017, after a gap of six years, SBI had reintroduced the monthly average balance charges. After criticism, it reduced the charges with effect from October 1.

“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.

"We have got some feedback. Based on the feedback, we will take a view," he said on the sidelines of its CSR initiative towards a bus donation to an NGO named "Save the Children India".

So far, it requires its savings bank account holders to maintain certain minimum balance every month. The bank has specified different monthly average balances (MAB) for accounts held in different types of branches.

These are metro, rural, urban and semi-urban.

Failure to maintain the required monthly average balance or minimum balance in SBI's savings bank accounts attracts a penalty. The amount of penalty depends upon the degree of shortfall. In other words, the farther you are from the required minimum balance, the bigger amount you have to pay as penalty being an SBI customer.

However, SBI had defended the move saying, "On an average balance of Rs 3,000 in metro, SBI earns Rs 6 only per month, whereas for a minimum balance of Rs 1,000 in rural, bank earns Rs 2 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 .

Although, 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. These accounts also have their limitations in its operations , largely kept the lower end of the pyramid for basic banking services.

It had originally increased the minimum balance requirement to Rs 5,000 for metros and Rs 3000 for semi urban, in April last year .

However, following public backlash SBI brought down the minimum balance requirement to Rs 3,000 in metros, Rs 2,000 in semi-urban and Rs 1,000 in rural centres.

Below are the charges at present:

Metro areas — Rs 3,000

If balance falls between Rs 2,999 and Rs 1,500, then the account holder will have to pay Rs 30 as penalty.

Balance betwen Rs 1,499 and Rs 750 will attract penalty of Rs 40

Below Rs 750 would attract fine of Rs 50.

Prior to October 2017, the penalties for these three stages were Rs 50, Rs 75 and Rs 100 respectively.

Semi-urban areas — Rs 2,000.

Non-maintenance of balance between Rs 1,999 and Rs 1,000 will be charged fine of Rs 20

Balance between Rs 999 and Rs 500 — Rs 30 fine

Less than Rs 500 — Rs 40 as fine.

Rural areas --- RS 1000

Balance between Rs 999 and Rs 500 --- Rs 20

Balance between Rs 499 and Rs 250-- Rs 30

Balance at Rs 249 or less -- Rs 40.

High charges by banks

Recently, as per reports, a study by an IIT-Bombay professor has claimed that public sector as well as private banks have been imposing unreasonable charges on customers for failing to maintain minimum balances in their savings accounts.

According to the study: "With many banks charging at an average high rate of 78 per cent per annum of the shortfall amount, it makes the whole regulation of reasonableness of charges as per cost quite shallow".

The study conducted by a professor of statistics, Ashish Das, showed that some banks like Yes Bank and Indian Overseas Bank have been imposing penal charges of over 100 per cent per annum on shortfall in maintenance of minimum balance in customers accounts.

The banking regulator Reserve Bank of India (RBI) guidelines mandate that charges for non maintenance of minimum balance in savings bank accounts be "reasonable and not out of line with the average cost of providing the services".

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