SBI retains minimum balance limit, but cuts penalty charges by 75%

The State Bank of India (SBI) on Tuesday reduced the penalty charges on non-maintenance of average mo­n­thly balance by up to 75 per cent from April 1 as the me­a­sure had faced a public backlash for raking in huge profits by way of penal charges.

But the bank has not lowered the monthly minimum balance requirement, which has been retained at Rs 3,000 for metro customers, Rs 2,000 for semi-urban accounts and Rs 1,000 for rural accounts.

The move will eat into the fee income of the bank, wh­ich had reported first quarterly loss in 20 years, as it had to make huge provisions for bad loans.

“We have reduced these charges taking into account the feedback and sentiment of our customers. We have always focused on keeping the interests of our custo­m­ers first and this is one of our many efforts towards fulfilling customer expectations,” SBI managing director for retail and digital banking PK Gupta said in a release.

Last April, the nation’s la­r­gest lender had re-introdu­c­ed the penal charges on non-maintenance of average monthly balance, after a gap of 5 years. Later in Octob­er, the bank had revised down the charges to some extent.

Between April and Nove­mber 2017, the bank netted a windfall of Rs 1,771.67 cr­o­re, more than its Q2 profit, from custo­m­ers for non-maintenance of minimum balance, according to the finance ministry data.

The bank on Tuesday reduced the charges for non-maintenance of AMB in the metros and urban centres from a maximum of Rs 50 per month plus taxes at 18 per cent to Rs 15 a month and taxes. For urban and me­tro customers average monthly balance is of Rs 3,000 per month. For semi-urban and rural centres, the charges have been reduced from Rs 40 to Rs 12, and Rs 10 per, respectively.

The bank has strong deposit franchise having 41 crore savings accounts and the above revision will benefit around 25 crore customers, he said. The bank offers its customers the option to shift from regular savings accounts to basic savings bank deposit accounts on which no charges are levied, he added.

Of the 41 crore savings accounts, 16 crore are under the Pradhan Mantri Jan Dh­an Yojana (PMJDY)/ BSBD and of pensioner, minors, social security benefit holders, which are all exempted from the penalty for not maintaining of the minimum balan­ce. SBI’s penalty on customers for non-maintaining minimum balance is much less than its private sector peers, though.

For instance, ICICI Bank and HDFC Bank have a mi­nimum monthly average ba­l­ance requirement of Rs 10,000 for a regular savings account in the metros and urban locations. While ICICI charges Rs 100 plus 5 per cent of the shortfall in required monthly average balance, HDFC Bank charges up to Rs 600 for not maintaining the balance.

SBI’s penalty on non-ma­intenance of monthly average balance has been defended and justified by cha­i­r­man Rajnish Kumar and his predecessor Arundhati Bhattacharya.

Last month, Kumar had said savings accounts are a product in which it is expected that some money wo­uld be available and transactions will take place. There are huge transactions costs associated with savings bank accounts, he had said.

“When an SBI customer uses debit card at some oth­er bank ATM, then SBI has to pay Rs 17 to the bank. My outgo on ATM card itself is Rs 1,500 crore annually. So­m­ewhere the bank also ne­eds to recover its cost,” he had said.

Kumar said there are over 14 crore basic savings bank deposit accounts, wh­ere SBI doesn’t charge anyth­ing and it also handles 40 per cent of the financial inclusion acco­unts. “We all, including myself, want a first class service, but want everything free. I also like it. But it can’t work this way that ev­erything co­mes free,” he said.