PSBs’ earnings from penalties on accounts more than net profit
The 21 listed public-sector banks (PSBs) earned nearly twice their aggregate net profit from penalties levied on non-maintenance of monthly average balance (MAB) in deposit accounts in FY17, showed data released by the ministry of finance in a response to a Lok Sabha question. According to the data, the PSBs earned Rs 864 crore in the financial year ended March 2017, while their aggregate net profit for the same period was Rs 474 crore. Interestingly, the same set of banks will close FY18 with a much larger sum in penalties on non-maintenance of MAB. So far in the current financial year, they have received at least Rs 2,321 crore through this charge. The swing factor between the two years is the decision by State Bank of India (SBI) to levy a penalty on non-maintenance on MAB this year; the bank did not impose any such penalty in FY17. In the eight months to November 2017, the country’s largest lender has raked in Rs 1,772 crore in such penalties, higher than its Q2FY18 net profit of Rs 1,582 crore, and nearly half its April-September net profit of Rs 3,587 crore.
At present, savings bank account-holders with SBI are required to maintain a minimum balance of Rs 3,000 if they are in a metro or other urban centre, Rs 2,000 if they are in a semi-urban location and Rs 1,000 in a rural centre. The penalty amount ranges from anywhere between Rs 20 to Rs 50, exclusive of goods and services tax (GST), depending on the shortfall in a particular account and the relevant location. The penalty does not apply to certain specific categories of accounts, such as financial-inclusion accounts and no-frills accounts opened under the Jan Dhan Yojana. SBI had done away with such penalties in 2012, but brought them back in early 2017. Outgoing chairman Arundhati Bhattacharya had in October defended the imposition of the penalty saying the charges would cross-subsidise financial-inclusion accounts opened by the bank.
“Except SBI, all the banks were charging for non-maintenance of minimum average balance,” she had said, adding, “Because there were certain number of accounts that we were supporting without any charges, it was necessary. Overall if there is need for improving or increasing charges it will be done.” SBI’s closest rival HDFC Bank has MAB requirements ranging from Rs 2,500 for regular savings accounts with rural branches to Rs 10,000 for those in urban branches. Penalty amounts range between Rs 150 and `600. ICICI Bank’s MAB ranges between Rs 1,000 and Rs 10,000, while penalty amounts can be anywhere between 5% of the shortfall and Rs 100 plus 5% of the shortfall.