What changed
RBI has directed all primary urban co-operative banks to stop imposing penal charges when customers fail to maintain minimum balance in accounts classified as inoperative. This extends the existing rule for Basic Savings Bank Deposit Accounts, where no charges apply for non-operation or activation, to all inoperative accounts.
What it means for you
Banks lose a potential fee income stream from inoperative accounts, which may impact non-interest revenue. However, it aligns with RBI's consumer protection push and reduces customer grievances. Lenders must update their systems to identify inoperative accounts and ensure no penalties are levied going forward.
What you must do
- Update internal policies to explicitly prohibit penal charges on inoperative accounts for minimum balance shortfalls.
- Review and revise fee schedules displayed on websites and branches to remove any such charges.
- Train frontline staff and customer service teams on the new rule to avoid inadvertent levy.
- Audit recent transactions to identify any wrongly levied charges and arrange refunds if applicable.
Who it affects
All Primary (Urban) Co-operative Banks, Customers with inoperative savings accounts, Bank operations and compliance teams
What qualifies as an 'inoperative account' for this rule?
The circular does not define 'inoperative account' explicitly. Banks should refer to their existing policies or regulatory definitions for determining inoperative accounts.
Does this circular affect active savings accounts?
No, the prohibition applies only to inoperative accounts. Banks may continue to levy penal charges for non-maintenance of minimum balance in active accounts, subject to existing disclosure norms.
Are there any exceptions for Basic Savings Bank Deposit Accounts?
Yes, BSBDAs were already protected under the August 2012 circular, which barred charges for non-operation or activation. This new circular extends similar protection to all inoperative accounts.