HDFC Bank, Axis Bank collect highest penalties from customers for non-maintenance of minimum average balance; Bank of Baroda tops public sector bank list

Indian banking regulators have scrutinized penalty collection practices across the sector, with HDFC Bank and Axis Bank emerging as the highest private-sector collectors of charges for non-maintenance of minimum average balance (MAB). Bank of Baroda leads public sector counterparts in similar collections over the tracked period, revealing structural differences in customer fee management between banking tiers.

The timing and scope of penalty collection reveal a critical pivot: most public sector banks have voluntarily withdrawn MAB penalties for savings accounts, signaling either regulatory pressure or strategic customer acquisition shifts. This disparity suggests private banks maintain more aggressive fee collection policies, potentially reflecting different customer bases and profitability models. The exemptions for zero-balance accounts under Jan Dhan Yojana highlight regulatory carve-outs for financial inclusion products.

The gap between private and public sector timing (private banks began collections one year later, FY 2022-23) indicates regulatory tightening may have accelerated private bank adoption of these charges as public sector banks faced scrutiny. Fee reversal by public banks could reflect reputational risk management or shifting deposit competition dynamics in a maturing Indian banking market.

Sector implication: This disclosure has minimal near-term market impact but underscores evolving regulatory expectations around customer-facing banking practices in India. The trend toward fee elimination for retail savings accounts may compress non-interest income for mid-tier lenders, though impact remains structural rather than cyclical.