Public sector banks (PSBs) have earned more than ₹11,500 crore over the past five years from penalties and service charges linked to minimum balance shortfalls, ₹5,715.42 crore from SMS alerts (total ₹17,251.41 crore) and suffered a loss of ₹2,617.07 crore from ATM usage, even as the government maintains that such charges are regulated, reasonable and subject to Reserve Bank of India (RBI) oversight.
The figures were disclosed by the Union ministry of finance in a written reply to the Lok Sabha on Monday, offering one of the clearest official snapshots yet of how much banks continue to collect from routine account-related charges, a long-standing sore point for ordinary depositors. Mala Roy and Dr MK Vishnu Prasad, members of Parliament (MPs), have asked for details of revenue earned by public and private sector banks through penalties and service charges during the last five years.
In his reply, Pankaj Chaudhary, the minister of state for finance, stated that RBI has informed that it does not maintain data relating to revenue earned by public and private sector banks from penalties and service charges. However, based on inputs from PSBs, the minister shared the revenue earned from penalties and service charges over the last five years.
Data shared by PSBs shows that penalties for non-maintenance of minimum balance remain the single largest contributor to such income. In FY20–21, banks collected ₹1,637.41 crore under this head. By FY23–24, the figure had jumped sharply to ₹2,909.10 crore, before marginally easing to ₹2,889.05 crore in FY24–25.
In five years alone, minimum balance shortfall charges added up to ₹11,535.99 crore, underscoring how significant this revenue stream continues to be for banks, despite repeated policy nudges towards customer-friendly practices.
The government acknowledged concerns raised by MPs about 'excessive charges' but stressed that levies are governed by board-approved policies and RBI instructions which require charges to be transparent, reasonable and aligned with the cost of providing services.
Interestingly, ATM-related charges tell a different story. Over the same five-year period, PSBs reported negative net income or losses of ₹2,617.07 crore from ATM usage. In FY24–25 alone, banks posted a net outgo of ₹647.32 crore under this category.
This negative figure reflects the economics of ATM operations, where banks often pay more in interchange fees to other banks than they recover from customers for cash withdrawals beyond free limits. The losses have steadily widened from ₹416.68 crore in FY20–21 to over ₹647 crore in FY24–25, highlighting the strain of maintaining ATM networks even as digital payments expand.
Revenue from SMS alerts, often criticised as an avoidable charge in the age of mobile apps, has been volatile. Banks earned ₹1,044.32 crore from SMS alerts in FY20–21 which rose to a peak of ₹1,282.03 crore in FY21–22.
Since then, the trend has been uneven. Income dipped to ₹977.28 crore in FY23–24 before rising again to ₹1,218.60 crore in FY24–25. The fluctuations suggest changing customer preferences, partial migration to app-based notifications, and possible rationalisation by some banks.
A key detail in the government’s reply is that RBI does not centrally maintain data on revenue earned by banks from penalties and service charges. The figures presented to Parliament were compiled from inputs submitted by public sector banks themselves.
Private sector banks’ numbers were not disclosed, limiting the picture to PSBs, even though private lenders are often accused by customers of levying higher charges.
In response to calls to cap or regulate charges, the government reiterated that customers already have access to zero-balance options, such as basic savings bank deposit accounts and accounts under the Pradhan Mantri Jan Dhan Yojana (PMJDY). These accounts do not require any minimum balance and offer basic services without penalty, the minister says.
PSBs, the government says, have also waived or rationalised minimum balance charges in regular savings accounts based on commercial considerations and board-level decisions to enhance customer centricity.
Rather than imposing hard caps, the government says it continues to rely on RBI’s supervisory oversight, financial literacy initiatives and expansion of digital banking infrastructure to protect customers from unreasonable charges.
Yet, the steady rise in minimum balance penalty income points to a persistent disconnect between policy intent and ground reality. While zero-balance accounts exist on paper, a large section of customers continues to operate regular savings accounts, where even small lapses can trigger charges.
For banks, these penalties remain a dependable revenue stream. For customers, especially low- and middle-income savers, the system often feels like a quiet tax on access to basic banking.
