RBI Prohibits Penal Charges on Non-Maintenance of Minimum Balance in Inoperative Accounts for Urban Co-operative Banks
Current · Source: Reserve Bank of India · RBI/2013-14/592 · issued 15 May 2014 · ~2 min read
Quick answerRBI has directed all primary urban co-operative banks not to levy penal charges for non-maintenance of minimum balances in inoperative accounts, effective from the date of the circular (May 15, 2014). This follows a proposal in the First Bi-monthly Monetary Policy Statement 2014-15 announced on April 1, 2014.
The rule, in the simplest words
Urban co-operative banks cannot charge a penalty when a customer does not keep enough money in an account that has not been used for a long time (called an 'inoperative account').
This rule started on May 15, 2014, and applies to all inoperative accounts, not just special basic accounts.
Banks must stop adding any fee for not having the minimum balance in these old, unused accounts.
If a bank already charged such a fee by mistake, it must give the money back to the customer.
How it plays out — a real example
A co-operative bank branch officer in Indore, Priya, checks a customer's savings account that has been inactive for two years. She remembers the RBI rule and tells the customer, 'Don't worry, we won't charge you any penalty for not keeping the minimum balance in this old account.' She then updates the bank's system to make sure no such fee is added automatically.
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
❓ Common questions
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.
📜 Read the original circular — full text as issued by RBI
RBI/2013-14/592
UBD.BPD.Cir.No.62/13.03.000/2013-14
May 15, 2014
The Chief Executive Officer
All Primary (Urban) Co-operative Banks
Dear Sir / Madam
Levy of Penal Charges on Non-Maintenance of
Minimum Balances in Inoperative Accounts
Please refer to Part B of the First Bi-monthly Monetary Policy Statement 2014-15 announced on April 1, 2014 , proposing certain measures towards consumer protection such as non-levy of penal charges for non-maintenance of minimum balance in the inoperative accounts.
2. In this connection, a reference is invited to our circular UBD.(PCB).Cir.No.54/09.39.000/05-06 dated May 26, 2006 in which urban cooperative banks were advised to display and update, on their website, the details of various service charges including minimum balance to be maintained in savings bank accounts and charges, if any, for non-maintenance thereof.
3. Further, in terms of Para 3 of our Circular UBD.BPD.Cir.5/13.01.000/2012-13 dated August 17, 2012 on 'Financial Inclusion-Access to Banking Services - Basic Savings Bank Deposit Accounts' it was advised to banks that no charge should be levied for non-operation / activation of Basic Savings Bank Deposit Accounts (BSBDAs).
4. It is advised that henceforth banks are not permitted to levy penal charges for non-maintenance of minimum balances in any inoperative account.
Yours faithfully,
(A.K.Bera)
Principal Chief General Manager
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2013-14/592 · issued 15 May 2014. The plain-English explanation above is BankPulse’s own independent summary.
Review and revise fee schedules displayed on websites and branches to remove any such charges.
📜 Compliance
Update internal policies to explicitly prohibit penal charges on inoperative accounts for minimum balance shortfalls.
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.
Grouped from the action items above — a single circular may involve more than one team.
Worked example & action-note template
Example: if you are a Compliance officer at a bank this circular applies to (All Primary (Urban) Co-operative Banks, Customers with inoperative savings accounts, Bank operations and compliance teams), your first concrete step on “RBI Prohibits Penal Charges on Non-Maintenance of Minimum Balance in Inoperative Accounts for Urban Co-operative Banks” is: “Update internal policies to explicitly prohibit penal charges on inoperative accounts for minimum balance shortfalls.” (RBI issued this 15 May 2014).
Circular: RBI/2013-14/592 -- RBI Prohibits Penal Charges on Non-Maintenance of Minimum Balance in Inoperative Accounts for Urban Co-operative Banks
Issued: 15 May 2014
Action required: Update internal policies to explicitly prohibit penal charges on inoperative accounts for minimum balance shortfalls.
Action required: Review and revise fee schedules displayed on websites and branches to remove any such charges.
Action required: Train frontline staff and customer service teams on the new rule to avoid inadvertent levy.
Action required: Audit recent transactions to identify any wrongly levied charges and arrange refunds if applicable.
Owner: ____________ Target date: ____________
Board/committee approval needed? Y / N
Evidence filed in compliance register on: ____________
Built only from this circular’s own published fields — not legal advice; always confirm against the official RBI source.
💬 Banker Discussion
Discuss this circular with fellow bankers — reply, upvote what helps, report what doesn’t belong. Be professional; no client data. Views are the commenter’s own, not BankPulse’s.
BankPulse Compliance Evidence Pack — generated 03 Aug 2026 · status cross-checked against RBI’s official withdrawal register (refreshed weekly). Official RBI source: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=8878&Mode=0 — Plain-English summary by BankPulse (bankpulse.ai), reviewed by our expert reviewer, CA Amit Jain. Independent platform, not affiliated with the Reserve Bank of India; is our own plain-English paraphrase, not RBI’s original wording.
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