Bank fines man over minimum balance without notice, now to pay Rs 15,000

Rs 590 deducted

• According to the complainant, he opened a current account with the bank on November 22, 2022, by depositing Rs 5,000.
• He alleged that on January 1 and February 1, 2023, SIB debited Rs 295 on the ground that the account had failed to maintain the prescribed minimum balance.
• The complainant alleged that the deductions were illegal as he had never been informed of any minimum balance requirement.
• He sought a refund of the deducted amount along with compensation for deficiency in service.
• SIB contested the complaint and denied the allegations, arguing that the deductions were made in accordance with the terms governing current accounts and banking practice.
• It maintained that such service charges were non-refundable and submitted that, as per the terms agreed to between the parties, the bank is at liberty to debit the amounts as their service charges.

Panel points to RBI guidelines

The commission noted that although the complainant admitted that he was familiar with banking operations and had maintained a current account with another bank for 25 years, he consistently stated that the minimum balance requirement had never been disclosed by the opposite party (South Indian Bank).

Referring to the broader principles underlying the Reserve Bank of India’s (RBI) guidelines on customer protection, the commission observed that while banks are permitted to prescribe minimum balance requirements, customers must be informed of such conditions when the account is opened and should receive prior notice.

“By applying the broader principles of interest of consumer, transparency, prior notice, contractual consent, fairness in banking services and absence of unfair trade practice, that to customer has not withdrawn any amount after deposit and no exception has been taken by opposite party by the bank by issuing prior notice or giving chance to maintain the difference in amount, approach of bank collecting Rs 295 is not acceptable,” the order read.

The commission noted that customers must be informed of the shortfall, and at least one month’s time should be given. It further stated that the charges must be proportionate and should not be excessive or arbitrary.

It added that the account should not become negative solely due to penalty deductions. “Bank must prove contractual authorization, account opening form, schedule of charges, terms and conditions. Though schedule of charges is produced…, it is not signed by any person or authority nor confronted to the complainant for having accepted the terms therein,” the commission observed.

The commission held that sudden deductions without notice amounts to deficiency in service. It partly allowed the complaint and directed SIB to refund Rs 590 collected as charges for non-maintenance of minimum balance amount in the account.

It further ordered to pay compensation of Rs 10,000 for deficiency in service and also pay Rs 5,000 as the cost of litigation to the complainant.

Significance of ruling

The ruling highlights that banks cannot impose penalty charges for non-maintenance of minimum balance without clearly disclosing the applicable terms and giving customers prior notice.

The burden lies on the bank to establish the customer’s informed consent to such charges, and unilateral deductions without proper disclosure or contractual authorisation can lead to consumer cases such as the above.

For consumer-related grievances, individuals may contact the consumer helpline in their respective states (Kerala helpline: 1800-425-1550) or call the National Consumer Helpline at 1915 for assistance.