CANARA BANK SCRAPS MINIMUM BALANCE RULE, USHERS IN A NEW ERA OF CUSTOMER-FRIENDLY BANKING
In a landmark move effective June 1, 2025, Canara Bank has abolished the minimum balance requirement for all savings accounts, including regular, salary, and NRI accounts. This bold decision eliminates penalties for non-maintenance of Average Monthly Balance (AMB), making Canara Bank the first major public sector bank to offer true zero-balance savings accounts universally. The policy aims to promote financial inclusion and ease banking access for millions, including salaried employees, students, senior citizens, and first-time account holders.
Canara Bank’s recent decision to waive the minimum balance requirement on all savings accounts marks a significant shift in the Indian banking landscape. This move not only eases the financial burden on millions of customers but also sets a new benchmark in customer-friendly banking practices among public sector banks. By eliminating penalties for non-maintenance of average monthly balance (AMB), Canara Bank is fostering greater financial inclusion, especially for economically weaker sections and first-time account holders who often struggle to maintain minimum balances.
The zero-balance savings account policy is expected to have a profound impact on rural and semi-urban customers, where irregular income patterns and limited financial literacy often lead to account dormancy or closure due to penalties. Canara Bank’s initiative will encourage these customers to keep their accounts active, thereby integrating more people into the formal banking system. This aligns well with the government’s ongoing efforts under schemes like Jan Dhan Yojana, which aim to provide universal access to banking services.
While Canara Bank has taken a pioneering step in the public sector, it is important to understand how other major banks compare. State Bank of India (SBI) had already waived minimum balance requirements in 2020, making it a trendsetter in this space. However, many private sector banks like HDFC, Axis, ICICI, and YES Bank continue to enforce relatively high minimum balance requirements, with penalties that can be substantial for low-income customers. This divergence highlights the ongoing challenge of balancing profitability with customer accessibility in the banking industry.
Canara Bank’s zero-balance policy also encourages greater adoption of digital banking services. Customers who previously avoided maintaining accounts due to minimum balance fears may now be more inclined to explore online and mobile banking platforms. This digital shift not only enhances convenience but also helps the bank reduce operational costs associated with branch visits and manual transactions, creating a more efficient banking ecosystem.
The move is expected to strengthen Canara Bank’s competitive position against private sector banks, which have traditionally relied on minimum balance fees as a significant revenue stream. By offering zero-balance accounts with robust digital features and customer support, Canara Bank can attract a broader demographic, including tech-savvy millennials and financially underserved populations.
Furthermore, the zero-balance initiative aligns with India’s broader financial inclusion goals under the National Strategy for Financial Inclusion. It supports the government’s vision of bringing every citizen into the formal banking fold, thereby promoting transparency, reducing cash dependency, and fostering economic empowerment at the grassroots level.
Finally, as the banking sector evolves, Canara Bank’s customer-first approach may inspire innovations beyond minimum balance waivers. Banks might introduce more personalized products, flexible fee structures, and enhanced financial education programs, ultimately transforming the way Indians interact with their banks and manage their finances.
HOW CANARA BANK’S ZERO-BALANCE POLICY BENEFITS CUSTOMERS
Previously, Canara Bank required an AMB of ₹2,000 in urban branches, ₹1,000 in semi-urban branches, and ₹500 in rural branches, with penalties levied for non-compliance. The new policy removes all such charges, allowing customers to maintain zero balance without fear of penalties. This move is expected to particularly benefit low-income groups, NRIs, and those with irregular income patterns, facilitating hassle-free banking and encouraging greater account usage.
The ripple effect of Canara Bank’s zero-balance policy is already being felt in the banking sector, with consumer advocacy groups urging other banks to follow suit. Many believe that this move will democratize banking, making it truly accessible to all segments of society, regardless of income level. As word spreads, customers of private banks with high minimum balance requirements are increasingly questioning the fairness of such policies and may consider switching to banks that offer more flexible options.
For salaried professionals and urban customers, the new policy offers added convenience and peace of mind. Temporary dips in account balances—such as during the end of the month or after major expenses—will no longer result in surprise penalties. This flexibility is especially valuable in today’s volatile economic climate, where financial planning has become more complex and unpredictable for many households.
Canara Bank’s initiative is also likely to boost financial literacy and inclusion among youth and students. With zero-balance accounts, young people can open and operate bank accounts without parental support or fear of penalties, learning essential money management skills early in life. This aligns with national educational goals and prepares the next generation for responsible financial behavior.
COMPARING MINIMUM BALANCE REQUIREMENTS: SBI, HDFC, AXIS AND OTHERS
While Canara Bank and State Bank of India (SBI) have waived minimum balance requirements for all savings accounts, most private banks continue to enforce them:
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SBI: Waived minimum balance since 2020, offering penalty-free zero-balance accounts.
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HDFC Bank: Requires AMB of ₹10,000 (urban), ₹5,000 (semi-urban), ₹2,500 (rural); penalties apply for shortfalls.
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Axis Bank: AMB of ₹12,000 (urban), ₹5,000 (semi-urban), ₹2,500 (rural); penalties similar to HDFC.
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ICICI Bank: AMB of ₹10,000 (urban), ₹5,000 (semi-urban), ₹2,000 (rural); penalties up to ₹500.
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YES Bank: AMB of ₹10,000 (urban), ₹5,000 (semi-urban), ₹2,500 (rural); penalties up to ₹500.
Canara Bank’s zero-balance policy places it ahead of many private banks, offering more inclusive banking options.
The penalties imposed by private banks for not maintaining minimum balances typically range from ₹150 to ₹600 plus applicable taxes, depending on the branch location and the extent of the shortfall. For customers with limited funds, these charges can quickly erode their savings and discourage regular banking. Canara Bank’s removal of such penalties removes this barrier, potentially encouraging more frequent transactions and greater engagement with banking products and services.
From a business perspective, Canara Bank’s move could lead to a short-term reduction in fee-based income generated from penalty charges. However, the long-term benefits may outweigh this loss. By attracting and retaining a larger customer base, the bank can increase deposits, cross-sell other financial products, and enhance its digital banking footprint. Moreover, increased account activity can lead to better data collection and customer insights, enabling more personalized and effective service offerings.
Financial inclusion experts have lauded Canara Bank’s decision as a progressive step towards democratizing banking in India. They emphasize that removing minimum balance requirements is crucial for encouraging savings habits among low-income groups, who often avoid formal banking due to fear of penalties. With more people maintaining active accounts, the overall health of the banking system improves, contributing to economic growth and stability.
THE BIGGER PICTURE: IMPACT ON FINANCIAL INCLUSION AND CUSTOMER EXPERIENCE
Canara Bank’s decision aligns with the Reserve Bank of India’s vision for greater financial inclusion and customer-centric reforms. By removing minimum balance penalties, the bank encourages more Indians, especially in rural and semi-urban areas, to open and maintain savings accounts. This move also enhances customer satisfaction and loyalty, as banking becomes more accessible and less burdensome. Analysts predict that this could prompt other banks to reconsider their minimum balance policies, intensifying competition and benefiting consumers nationwide.
Customers stand to benefit significantly from this policy change. Students, senior citizens, daily wage earners, and small business owners will find banking more accessible and less stressful. The elimination of minimum balance penalties means that even those with fluctuating incomes can maintain their accounts without the constant worry of incurring charges. This fosters trust and loyalty, which are essential for long-term customer relationships.
Digital banking services offered by Canara Bank complement this zero-balance initiative. With increasing smartphone penetration and internet access, customers can conveniently manage their accounts, transfer funds, and pay bills without visiting branches. The combination of zero-balance accounts and enhanced digital services positions Canara Bank well to serve the evolving needs of India’s diverse population.
Senior citizens and pensioners stand to gain significantly as well. Many retirees rely on fixed incomes and may occasionally face cash flow issues. The removal of minimum balance penalties ensures that their savings remain intact, and they can use their accounts freely for pension credits, medical expenses, and daily needs without the burden of additional charges.
The policy could also have positive implications for the government’s Direct Benefit Transfer (DBT) schemes. With more people maintaining active accounts, the delivery of subsidies, pensions, and welfare payments becomes smoother and more efficient. This reduces leakages and ensures that government benefits reach the intended recipients directly and securely.
Ultimately, Canara Bank’s bold step is a win-win for both the institution and its customers. By prioritizing accessibility and customer satisfaction, the bank is likely to see increased loyalty, higher account openings, and a stronger reputation in the marketplace. As other banks watch closely, this move could well be the catalyst for a new era of customer-centric banking in India.
Looking ahead, Canara Bank’s move may prompt other banks to revisit their minimum balance policies to remain competitive. As customers become more aware of their options, banks that continue to impose stringent minimum balance requirements risk losing market share. This competitive pressure could lead to a broader industry trend towards zero-balance accounts, further advancing the cause of financial inclusion across India.
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