SBI is mulling slashing its minimum account balance (MAB) requirement. This comes days after the finance ministry reported SBI had earned Rs. 1,771cr from fines levied on non-maintenance of MAB during April-November'17.
Sources say it might reduce to Rs. 1,000, but no decision has been made yet.
It is also considering implementing a quarterly average balance requirement rather than monthly. Find details here.
SBI mulls reducing MAB requirements after backlash
What are the current MAB requirements and penalties?
Currently, the MAB for metros/urban, semi-urban and rural centers is Rs. 3,000, Rs. 2,000 and Rs. 1,000.
Penalty for non-maintenance of MAB can range between Rs. 20-100 depending on the region and the amount of shortfall.
SBI's earnings from this penalty during April-November'17 (Rs. 1,772cr) was more than its July-September quarter net profit (Rs. 1,581.55cr), IE reported.
The figures drew much criticism.
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Why does it need to levy a penalty anyway?
SBI has defended the penalty citing increase in expenses: one of its biggest expenditures is on the maintenance of Jan Dhan accounts and on linking Aadhaar with accounts.
Moreover, it provides many services in comparison to the penalty levied, including free cheque books, some free ATM transactions a month and free branch transactions, it said.
The earnings from MAB are "meager", it claimed.
MAB penalties were reintroduced this fiscal after five years
SBI had re-implemented MAB charges this fiscal year after a gap of five years. In April, it was fixed at Rs. 5,000, Rs. 3,000 and Rs. 1,000 for urban, semi-urban and rural branches.
However, after protests, the requirement was reduced to Rs. 3,000, Rs. 2,000 and Rs. 1,000 respectively from October 1.
Non-maintenance of MAB charges were also slashed by 20-50%.
Comparison with other major banks
Though SBI's MAB requirements are higher than most public sector banks, it is much lower compared to major private lenders. For example, Axis, HDFC, Kotak, IndusInd and ICICI need customers to maintain MAB of Rs. 10,000 for metros; for Yes Bank, it's Rs. 5,000.