New Delhi: Facing unprecedented pressure on their profitability due to staggering bad loans, banks have now found minimum account balance (MAB) charges as a lucrative source of revenue.
The State Bank of India (SBI), the country’s largest public sector bank, for example, raked up as much as Rs 1,771 crore during April-November 2017 in MAB charges, according to an Indian Express report. The amount surpasses the bank’s second quarter net profit of Rs 1,581.55 crore.
During the 2016-17 financial year, SBI did not collected any revenue from maintenance of MAB, a charge which was re-imposed by the bank in April after a gap of five years.
The bank has a total of 42 crore savings bank accounts, of which 13 crore are Basic Savings Bank Deposits Accounts and Pradhan Mantri Jan-Dhan Yojana accounts, both exempted from such charges.
After SBI, Punjab National Bank recorded the second highest collection of Rs 97.34 crore from MAB charges during the period, followed by Central Bank of India and Canara Bank, which collected Rs 68.67 crore and Rs 62.16 crore, respectively.
Punjab and Sind Bank is the only state-owned lender which did not collect any MAB charges during the April-November period. Most of public and private sector banks levy charges for non-maintenance of a minimum account balance.
In September, the SBI reduced the MAB requirement for customers in metro cities to Rs 3,000 from an earlier Rs 5,000. The bank also exempted pensioners, beneficiaries of social benefits as well as minors from levy of these charges with effect from October 1. This exemption was in addition to Basic Savings Bank Deposits Account customers.
Between April and September, SBI imposed these charges in metro, urban as well as rural centres.
In the case of metro centres, the failure to meet the Rs 5,000-balance requirement led to Rs 50 charge for 50% shortfall, Rs 75 for shortfall between 50-75% and Rs 100 for 75% or more shortfall. For urban centres, the failure to meet a minimum balance of Rs 3,000 will attract Rs 40 in service charge, Rs 60 for 50-75% shortfall and Rs 80 for 75% or more shortfall.
Apart from charges related to non maintenance of MAB, the bank charged an annual maintenance fee of Rs 125-300 for debit cards depending on the category of the card. On September 25, the SBI announced a downward revision in charges for non-maintenance of MAB ranging from 20% to 50% across all population groups and categories.
The combined bad loans of 21 public sector banks (PSBs) are estimated at Rs 7.33 lakh crore as at the end of September 2017. According to Reserve Bank of India, PSBs had written off Rs 2.28 lakh crore in bad loans in nine years to fiscal 2015-16. PSBs have written off loans of Rs 55,356 crore during April-September 2017, nearly 54% more compared to the same period last fiscal, according to the data compiled by rating agency ICRA.