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Not maintaining minimum balance in your account?

Are you one among the many who don't keep a close track of the balance in your bank accounts; especially when you have too many of them?

Are you one among the many who have had to pay a penalty for not maintaining the minimum monthly / quarterly average balance in your savings account as stipulated by your bank?

Good news! RBI comes to the rescue of such "inattentive" customers.

For quite some time, Dr. Raghuram Rajan had been deliberating on this tricky issue where neither the banks nor the customers suffer due to genuine reasons.

Accordingly, as a first step, RBI had in May 2014 "advised that henceforth banks are not permitted to levy penal charges for non-maintenance of minimum balances in any inoperative account".

As regards the regular accounts, one option being considered was to curtail the services offered to the defaulting customers, instead of charging a penalty.

However, after extensive discussions with the banks and the recommendations of Damodaran Committee, RBI has now announced new guidelines on 'levy of charges for non-maintenance of minimum balance in savings bank account'.

As per the latest guidelines notified by the Reserve Bank of India,

1. As soon as the balance in your account drops below the minimum balance or the minimum average monthly / quarterly balance prescribed by your bank, it must inform you of the default. A written communication by way of an email / SMS or a letter should be sent to you in this regard.

2. Further, the bank should give you at least a month's time, from the date of notice, to restore the account to the prescribed minimum balance.

3. If the default is not rectified within this one month of the notice period, penal charges would become applicable.

4. Banks shall then be free to recover these penal charges by debiting your account and send you an intimation of the same.

5. Each bank, subject to the approval of its Board, shall decide on the policy to levy penal charges for non-maintenance of minimum balance in the savings account.

6. Care must, however, be taken to ensure that such charges are not unreasonable and are in line with the average cost of providing banking services.

7. Instead of charging a lump sum amount, the penal charges should be proportionately linked to the extent of shortfall. Suitable slabs may be worked out so that a fixed percentage is charged as penalty depending on the difference between the actual balance in the account and the minimum amount stipulated by the bank.

8. Lastly, banks should ensure that the account balance doesn't become negative solely due to debiting the penal charges for non-maintenance of minimum balance.

These guidelines shall be effective from April 1, 2015.

By the way, I hope you would have read How to calculate Minimum Average Balance.

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