Around five years ago, Indian banks introduced two charges that have since become a significant burden for customers—ATM usage fees and Minimum Average Balance (MAB) penalties. These fees disproportionately affect those at the bottom of the banking pyramid, often the less financially literate or those with limited access to digital banking. While banks argue that these charges help cover operational costs, the numbers tell a different story. Estimates suggest that cumulative ATM usage fees generate around ₹8,000 crore annually, while MAB-related penalties contribute approximately ₹21,000 crore. Combined, this amounts to nearly $3.3 billion in revenue for banks — a figure that raises questions about fairness, especially in light of the recent 10% increase in ATM withdrawal fees.
The Minimum Average Balance requirement forces customers to maintain a certain amount in their accounts or face penalties. For many, this is an unnecessary hurdle, particularly for low-income individuals who may struggle to keep a consistent balance. The penalties, though seemingly small per account, add up to billions at a systemic level. Similarly, ATM usage fees—imposed after a limited number of free transactions—disproportionately impact those who rely on cash due to limited digital access. While digital transactions are rising, cash remains essential for daily wage workers, small vendors, and rural populations. The irony is that these fees extract the most from those who can least afford them.
Banks justify these charges as necessary to offset infrastructure and maintenance costs. However, the profitability of these fees suggests otherwise. The ₹29,000 crore generated annually from these two charges alone is a substantial revenue stream, one that is effectively subsidized by the most vulnerable customers. In contrast, high-net-worth individuals and corporate clients often enjoy fee waivers and premium services. This disparity highlights an imbalance in how banking costs are distributed. While financial institutions must remain viable, the question is whether profitability should come at the expense of financial inclusion.
The broader implication is that banking, which should ideally empower all customers, often functions as a regressive system where the poor pay more. A customer with a low balance may end up losing a significant portion of their savings in penalties, while someone with higher liquidity faces no such deductions. The recent hike in ATM fees only exacerbates this issue. If the goal of banking is to serve the economy at large, then these charges need reevaluation. Transparency in how fees are calculated and a reassessment of who bears the cost would be a step toward fairer banking practices. For now, it’s worth asking—how much is your bank making from your account?