Banks free to decide on minimum balance for savings accounts: RBI Guv

Gozaria (Guj) | Reserve Bank of India Governor Sanjay Malhotra on Monday said banks are free to decide the minimum balance for savings accounts and that it does not fall under the regulatory domain of the RBI.

He was speaking to reporters on the sidelines of a function on 'Financial Inclusion Saturation Drive' organized at Gozaria village panchayat in Gujarat's Mehsana district.

Asked about a private bank increasing the minimum balance required for savings accounts, Malhotra said, "The RBI has left it to individual banks to decide on what minimum balance they want to set. Some banks have kept it at Rs 10,000, some have kept Rs 2,000 and some have exempted (customers). It is not in the regulatory domain (of RBI)." In a recent decision, private lender ICICI Bank increased the minimum balance requirement for those opening new savings accounts from August 1.

The minimum average monthly balance (MAB) has been increased by five times to Rs 50,000 from Rs 10,000 on savings bank account, as per the lender's website.

Similarly, MAB for semi-urban locations and rural locations have been increased five times to Rs 25,000 and Rs 10,000, respectively.

Incidentally, the State Bank of India has decided not to penalise savings account holders if they do not keep minimum balance.

Traditionally, public sector banks have lower balance requirements compared to private lenders with the requirement waived for Jan Dhan accounts. Several public sector banks have done away with the requirement, and customers who fail to maintain the minimum prescribed balance do not need to pay a penalty.

Speaking at the event, Malhotra said digital literacy was very important to succeed in the new age.

"Earlier they used to say if you do not study you will not prosper. In today's age, this is the same for digital literacy. If you do not have digital literacy you will not progress," he said.

All decisions that are taken must ensure it benefits the last person in society, the RBI governor asserted.

The Pradhan Mantri Jan Dhan scheme was started with the same goal some 10 or 11 years ago so that everybody could get access to banking services, he said.

"But opening an account is just the beginning, a door has been opened. The government has started various schemes like accident insurance, life insurance and Atal pension scheme. I urge everyone to take benefit of these. To get proper banking service is your right," he said.

Bank of Baroda managing director and chief executive officer CEO Debadatta Chand, speaking at the event, emphasised the importance of regularly updating 'Know Your Customer' (KYC) details for Jan Dhan accounts to ensure they remain functional.

The function also witnessed distribution of Atal Pension Yojana insurance certificates and accident claim insurance to kin of those who had died after availing insurance in Gozaria village.