Bank of Baroda Removes Minimum Balance Charges on Savings Accounts: What It Means for Your Savings Account!

Bank of Baroda has decided to eliminate charges for not maintaining a minimum balance in standard savings accounts. This change, effective from July 1, aligns with a trend among public sector banks. The move excludes premium products and follows similar actions by Canara Bank, Punjab National Bank, and Indian Bank. These changes reflect evolving customer behaviour and ongoing policy discussions.

The State Bank of India (SBI) was the pioneer in this area, having waived minimum balance requirements back in 2020. SBI Chairman CS Setty highlighted the benefits of this policy for first-time account holders. "Even in non-financial inclusion accounts, somebody wants to open an account and even if you don't ask for minimum balance, 95% of these accounts get funded but as a customer service-oriented measure, we don't charge," Setty stated.

Impact on CASA Deposits

The decision comes amid discussions between the finance ministry and public sector banks regarding penalties on low balances. Banks are experiencing a decline in low-cost current and savings account (CASA) deposits. According to the Reserve Bank of India's Financial Stability Report from June 2025, CASA deposits fell to 36.8% of total deposits by March 2025, down from 39.2% the previous year.

In contrast, term deposits and certificates of deposit have increased their share to 63.2%, indicating banks' growing reliance on higher-cost funding sources. This shift is partly due to the changing landscape of banking services and customer preferences.

Influence of Jan Dhan Accounts

Trends in Jan Dhan accounts also play a role in these developments. Initially starting with low balances, these accounts have seen a steady rise in average balances, increasing by 18% year-on-year according to the RBI report. The Jan Dhan Yojana has introduced over 50 crore new accounts into the system, providing banks with a large customer base that is gradually becoming more engaged.

Banks historically covered service costs through income from low-interest savings accounts and non-compliance charges. However, digital banking's growth has reduced individual account servicing costs. Now, banks rely on other revenue streams like debit card fees and transaction charges while phasing out balance-related penalties.