Amid reports that the country's largest lender, State Bank of India reducing the maintenance of monthly average balance (MAB) charges to Rs 15 per month on Tuesday, a reply to an RTI query has revealed that SBI has closed as many as 41.16 lakh savings accounts between April-January in the current fiscal year for not maintaining the average monthly balance.
The bank had re-introduced the penal charges on non-maintenance of average monthly balance after a gap of five years, last April charging up to Rs 100 as penalty. Later in October, it had revised down the charges to some extent.
Over the following eight months, the bank netted nearly Rs 1,772 crore - 12 percent more than its profits for the second quarter of the current fiscal - from customers for non-maintenance of MAB. Other government banks that were already collecting amounts in excess of Rs 50 crore as penalty from customers for falling below their minimum average balance requirements included Punjab National Bank, Canara Bank and IDBI Bank. Meanwhile, private banks like ICICI and HDFC Bank impose a far-steeper fine of up to Rs 600.
"Due to provisions of penalty on non-maintenance of minimum balance, the bank has closed 41.16 lakh savings bank accounts between April 1, 2017 and January 31, 2018," the bank replied to an RTI query filed by Chandra Shekhar Gaud from Neemuch in Madhya Pradesh. The reply was furnished to a specific query on the number of accounts being closed after introduction of charges on non- maintenance of minimum balance from April 1, 2017.But since SBI was in the media eye, having recently rejoined the penalty bandwagon, it bore the brunt of the public outrage. In the face of the mounting backlash, SBI had initially lowered the MAB requirement threshold and halved the maximum fine applicable.
Now SBI customers have even more cause to celebrate: The lender has decided to lower the penalty further, to just Rs 15, plus GST, per month for customers in the metros and urban centres. For rural and semi-urban centres, the charges have been brought down to Rs 10 and Rs 12 per month (plus GST) respectively, down from Rs 40 per month plus GST in September 2017. This 70 percent cut in the penalty amount is expected to benefit over 25 crore SBI customers.
"We have reduced these charges taking into account the feedback and sentiments of our customers," SBI's managing director (retail and digital banking) P.K. Gupta said. "The bank has always focused on keeping the interests of its customers first and this is one of our many efforts towards fulfilling customers' expectations," he added. The new charges will be application from April 1. However, the MAB thresholds have not been tweaked further. SBI customers from urban centres are required to maintain MAB of Rs 3,000, while the same for semi-urban and rural centres stands at Rs 2,000 and Rs 1,000 respectively.
If you are not an SBI customer, you will have to continue to be vigilant about the average balance in your bank account - unless it is a zero balance account, like a salary account and the financial inclusion accounts. The alternative is to continue paying steep penalties, at least till the RBI forces all public and private banks to follow SBI's lead.
Confused about how the monthly/quarterly minimum average balance is calculated? The first thing to understand is the importance of the word "average". You don't have to obsess about sticking to the threshold stipulated by your bank - which can be anything from Rs 500 quarterly as in the case of Corporation Bank to Rs 10,000 monthly for the leading private banks - every single day of the month.
For instance, the basic formula for calculating MAB is dividing the sum total of all end-of-day (EOD) closing balances in your bank account by the number of days in that month, including holidays. Using SBI as an example, the account holder would need to keep Rs 3000 MAB. Let's assume he had a balance of Rs 10,000 in his savings account on February 1, but withdrew Rs 8,000 on Feb 8.
Here his EOD balance from Feb 1 to Feb 7 would be Rs 10,000 x 7 (days) = Rs 70,000
His EOD balance from Feb 8 to Feb 28 would be 2000 x 21 = Rs 42,000
So his MAB would be (Rs 70,000+Rs 42,000) divided by 28, i.e. Rs 4,000. That's well above SBI's minimum MAB requirement, despite having just Rs 2,000 in his account for most part of the month.
The penalty for non-maintenance of MAB is calculated on a staggered basis - depending on the shortfall - so be sure to go through your bank's website for the relevant details.
SBI, for one, also offers its customers options to convert their regular savings bank account to basic savings bank deposit account (BSBD), on which no charges are levied. A customer always has the option of converting the regular savings bank account to BSBD account free of charge, in case he desires to avail basic savings bank facilities without being subject to maintenance of MAB, said Gupta.
(With PTI inputs)