RBI Circular on Minimum Balance Limit and Charges by Banks

Can RBI intervene if banks set the maximum balance limit at a very high level? Let’s have a look at the RBI Guidelines.

RBI Circular December 26, 2002

RBI issued a circular to all scheduled commercial banks and said:

Reserve Bank of India has not issued any guidelines regarding the minimum balance to be maintained in savings bank accounts. The banks have been prescribing the minimum balance to be maintained taking into consideration the cost involved in maintaining and servicing such accounts and also levying specific charges, if minimum balance is not maintained. There is, however, no uniform approach in this regard.

It has been reported to us that banks do not apprise the customers about the requirement of minimum balance at the time of opening of the accounts and also do not highlight the implication such as levying of charges etc. if the minimum balance is not maintained. Banks also do not ensure to inform the customers about any change in the minimum balance requirement.

We have had the matter reviewed and advise that henceforth banks should inform customers regarding the requirement of minimum balance at the time of opening the account in a transparent manner. Any subsequent changes in this regard should also be intimated to the account holders. The banks may decide the manner in which the information is made available to the customers.

RBI Circular November 20, 2014

RBI issued a circular to all scheduled commercial banks and said:

(i) In the event of a default in maintenance of minimum balance/average minimum balance as agreed to between the bank and customer, the bank should notify the customer clearly by SMS/ email/ letter etc. that in the event of the minimum balance not being restored in the account within a month from the date of notice, penal charges will be applicable.

(ii) In case the minimum balance is not restored within a reasonable period, which shall not be less than one month from the date of notice of shortfall, penal charges may be recovered under intimation to the account holder.

(iii) The policy on penal charges to be so levied may be decided with the approval of Board of the bank.

(iv) The penal charges should be directly proportionate to the extent of shortfall observed. In other words, the charges should be a fixed percentage levied on the amount of difference between the actual balance maintained and the minimum balance as agreed upon at the time of opening of account. A suitable slab structure for recovery of charges may be finalized.

(v) It should be ensured that such penal charges are reasonable and not out of line with the average cost of providing the services.

(vi) It should be ensured that the balance in the savings account does not turn into negative balance solely on account of levy of charges for non-maintenance of minimum balance.

Download RBI Circular PDF December 26, 2002

Download RBI Circular PDF November 20, 2014