Bank Of Baroda Joins Public Sector Peers In Dropping Minimum Balance Charges

Bank of Baroda has removed charges for non-maintenance of minimum balance in standard savings accounts, joining a growing list of public sector banks doing the same. The change came into effect from July 1 and applies to all regular savings accounts, excluding premium products.

This move follows recent steps by Canara Bank, Punjab National Bank, and Indian Bank, as more state-owned lenders respond to evolving customer behaviour and policy discussions.

State Bank of India was the first to act in this direction, waiving minimum balance requirements in 2020. SBI Chairman CS Setty recently told NDTV Profit that the policy has helped first-time account holders.

“Even in non-financial inclusion accounts, somebody wants to open an account and even if you don't ask for minimum balance, 95% of these accounts get funded but as a customer service-oriented measure, we don't charge,” Setty said.

The shift comes amid ongoing discussions between the finance ministry and public sector banks over penalties on low balances. The issue has gained attention as banks face a decline in the share of low-cost current and savings account deposits.

CASA deposits fell to 36.8% of total deposits as of March 2025, down from 39.2% a year earlier, according to the Reserve Bank of India's Financial Stability Report published in June 2025. In contrast, term deposits and certificates of deposit accounted for 63.2%, reflecting banks' rising reliance on higher-cost funding sources.

Bankers also cite trends in Jan Dhan accounts as an influencing factor. While many of these accounts began with low balances, the RBI report noted a steady increase in average balances, which were up 18% year-on-year.

The Jan Dhan Yojana has brought over 50 crore new accounts into the system, offering banks a large base of customers who are gradually increasing their engagement.

Historically, banks recovered service costs through income from low-interest savings accounts and charges on non-compliance. However, the growth of digital banking has reduced the cost of servicing individual accounts. Banks are now using other revenue sources such as debit card fees and transaction charges to cover costs, even as they phase out balance-related penalties.