Reena Dhiman, 32, who needed money, thought of redeeming some of her old debt mutual fund investments. But she got a rude shock when her bank deducted the entire amount for non-maintenance of minimum balance charges. In fact, her account was showing a negative balance. Reena had done lump sum mutual fund investments through her old salary account with HDFC Bank, which she didn’t operate after that. It’s been around four years since she changed her job and the account was converted into a savings account in December 2016, as no salary was credited into the account.
Reena is not alone. There are many people who are complaining on social media about banks charging non-maintenance of minimum balance penalty in the current situation where many people are facing a cash crunch due to the covid-19 crisis.
Finance minister Nirmala Sitharaman had also directed banks not to charge non-maintenance of minimum balance charges till 30 June. The time limit is over but in Reena’s case, the bank deducted charges in the month of June.
The balance in a savings bank account can’t be negative because of the non-maintenance of minimum balance charges, as per the Reserve Bank of India’s notification issued in November 2014. “It should be ensured that the balance in the savings account does not turn into negative balance solely on account of levy of charges for non-maintenance of minimum balance,” said the RBI notification.
Reena approached HDFC Bank and her money was partially refunded and she was informed through a mail that if she continues to maintain the minimum balance, the remaining charges deducted will also be refunded.
We wrote two emails to HDFC Bank on how her account was showing negative balance along with the details of Reena’s account, however, both the mails remain unanswered till date.
Non-maintenance of minimum balance
There are many people who are changed for non-maintenance of minimum balance in their savings accounts every year. In response to a query in Lok Sabha, in July 2019, the finance ministry had said that 18 public sector banks and four privately-run banks charged around ₹10,000 crore as penalty on non-maintenance of minimum balance in the past three years.
Banks are allowed to charge non-maintenance of minimum balance penalty to the customers but there is no cap on the charges. The penal charges have to be approved by the bank’s board. Banks charge different charges based on the location of the account. The non-maintenance charges vary for urban, semi-urban and rural branch customers as well as there are various slabs of charges depending on the average monthly balance requirement and the shortfall.
“RBI has directed banks to charge proportionally as per the difference between the actual balance and minimum account balance requirement,” said Raj Khosla, CEO, MyMoneyMntra.com, a financial services provider.
For example, HDFC Bank has an average monthly balance (AMB) requirement of ₹10,000 for urban branch accounts while for semi-urban branch accounts the requirement is ₹5,000. So, if the AMB is below ₹2,500 in an urban branch account, the charges are ₹600 per month while if the AMB is less than ₹10,000 but above ₹7,500, the charge is ₹150. The charges are divided into four slabs, including these two.
Close your inoperative accounts
Banks are supposed to intimate their customers through SMS, email, letter or through other mediums that penal charges will be levied in case of non-maintenance of minimum balance.
Reena did get messages from HDFC Bank, saying penalty charges will be levied for non-maintenance of minimum balance but like most other people she couldn’t take out the time to visit the branch and close the bank account due to the lockdown. As she didn’t want to operate that account, she didn’t even transfer money in the account.
Therefore, time and again we have advised our readers to close the bank accounts, which they are not operating. Banks are not supposed to charge a penalty in case of inoperative accounts (no transaction happened for two years) as per RBI master circular issued in 1 July 2014. So, if the bank charges you a penalty, you can claim it back but it will be better to close such accounts as claiming back the money may not be hassle-free.
But before closing the account, you should de-link all your investments, systematic investment plans (SIPs) and equated monthly instalments (EMIs) with that account.
“It is paramount to close the bank account by personally visiting the home branch and surrender all cheques for security. Though you can also send a letter to the bank manager and request the same. Also before requesting the account closure, you should de-link your credit card payments, recurring deposits and standing instructions, among others,” said Khosla.