The Reserve Bank of India has proposed in its bi-monthly monetary policy review to stop charging penalties for non-maintenance of minimum balance in savings accounts.
The central bank said that lenders should not take undue advantage of customer difficulty or inattention.
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"Instead of levying penal charges for non-maintenance of minimum balance in ordinary savings bank accounts, banks should limit services available on such accounts to those available to basic savings bank deposit accounts and restore the services when the balances improve to the minimum required level," Reserve Bank of India added.
However, banks such as HDFC said that the penalty removal will lead to higher charges on services for customers and will result in customers paying more than the penalty.
Punjab National Bank chairman and Indian Banks Association head KR Kamath said the directions are clear as it allows customers to create a set of accounts where they are not charged for not maintaining minimum balance but will be entitled to only limited services.
"If you want more you will probably have to pay for it," Kamath added.
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By GlobalDataReserve Bank of India also stated that banks should also remove penalty for borrowers prepaying floating rate term loans.
