How to Save Yourself from Paying Penalty on Non-Maintenance of Minimum Balance

Bank of Maharashtra, Kotak Mahindra Bank, and Axis Bank have revised their charges for non-maintenance of minimum balance effective 1 August. While Axis Bank and Kotak Mahindra Bank will charge a penalty based on the type of account if the account holder fails to maintain the minimum balance, Bank of Maharashtra has announced that its minimum balance requirement has been increased from ₹1,500 to ₹2,000. If a customer fails to maintain this amount in an account, the bank will now charge a penalty of up to ₹75 per month. Most major banks in the country charge their account holders for the non-maintenance of minimum average balance (MAB), and with the government's waiver on banks charging a penalty for the non-maintenance of minimum balance having ended in June, many of us might end up paying for letting our account balance dip.


If you find yourself either unable to or forgetting to maintain minimum balance requirements imposed by your bank and paying out penalties as a result, a zero balance account might be just the thing you need. If you’re a salaried employee, you probably already have a zero balance savings account as such accounts typically come with this advantage. But you can also open a zero balance account for personal use. These are called basic savings bank deposit (BSBD) accounts and most banks offer these as a way to increase financial inclusion among the economically weaker sections of the society. You can open a zero balance account by completing the know your customer (KYC) formalities, and the biggest advantage of such accounts is that there is no need to maintain a minimum balance. “Most banks offer a zero balance account where the MAB you need to maintain on both a monthly and a quarterly basis is zero. Most often, these are coupled with salary accounts. However, there are also stand-alone zero balance accounts that do not require you to maintain a minimum balance," said Adhil Shetty, CEO, BankBazaar.


Banks offer the same interest rate on BSBD accounts as they do on regular savings bank accounts, so you would not be losing out on that front either. However, there are also some restrictions in place. For instance, if you want to open a zero balance savings account with SBI, you will not be authorized to hold any other savings bank account with the bank. If you already have one at the time of opening the zero balance account, you will be required to close it within 30 days of opening the BSBD. “While there is no difference between the functions of a zero-balance and a regular savings account, the facilities offered to differ from bank to bank. Also, at times, these zero balance accounts tend to be basic accounts with very few features. For instance, there could be transaction limits for the account. There could also be a limit on the number of withdrawals a month," said Shetty. This is the case with SBI’s BSBD, which only allows you to make a maximum of four transactions in a month, whether it is withdrawing cash from ATMs or transferring money through NEFT, RTGS, among others. While these rules vary from bank to bank, you can expect BSBDs to have limited facilities compared with regular savings bank accounts as these are supposed to be “no-frills".





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