Major Move by Indian Bank and PNB to Promote Financial Inclusion

In a significant development for banking customers in India, Indian Bank and Punjab National Bank (PNB) have both announced the complete waiver of minimum balance charges on their savings bank accounts. This move, aimed at promoting financial inclusion and easing customer costs, is expected to benefit millions of account holders, especially in rural and low-income segments.

Indian Bank will implement its waiver from July 7, 2025, while Punjab National Bank has already put its decision into effect from July 1, 2025.

Indian Bank’s Initiative: Zero Minimum Balance Charges and Lending Rate Cut

Indian Bank announced that from July 7, it will completely remove minimum balance charges across all savings bank accounts. This means customers will no longer face penalties for failing to maintain a minimum average balance, a policy that has often discouraged low-income customers and students from using formal banking services.

According to Indian Bank,

“The move is aimed at fostering financial inclusion and making banking more accessible and affordable for all sections of society.”

This initiative will directly benefit a diverse customer base, including:

• Students, who often struggle to maintain minimum balances.

• Senior citizens, who rely on limited incomes.

• Small business owners, especially in semi-urban and rural areas.

• Rural customers, who are often excluded from formal banking.

By removing these charges, Indian Bank hopes to encourage more people from underserved communities to enter the formal banking system, ensuring greater financial security and participation in the economy.

Indian Bank Lowers Lending Rates

In addition to waiving minimum balance charges, Indian Bank also announced a reduction of 5 basis points in its one-year Marginal Cost of Funds-Based Lending Rate (MCLR), effective July 3, 2025.

The new rate will be 9%, down from 9.05%.

This reduction will directly benefit borrowers by lowering the interest cost on loans tied to the one-year MCLR, which typically includes home loans, personal loans, and small business loans.

Indian Bank stated,

“This reduction will directly benefit borrowers with lower interest rate on loan.”

By lowering lending costs, the bank aims to stimulate credit growth, supporting small businesses, housing, and consumption, which are essential drivers of India’s economic growth.

Punjab National Bank’s Customer-Friendly Move

Punjab National Bank (PNB) has also taken a major step to support financial inclusion by waiving penal charges for non-maintenance of minimum average balance (MAB) on all savings accounts.

This decision took effect July 1, 2025, and applies across all customer segments.

PNB highlighted that this move is designed to support priority segments, including:

• Women

• Farmers

• Low-income households

By eliminating balance maintenance penalties, PNB hopes to make banking more inclusive and stress-free, removing a key barrier that discourages many people, especially in rural areas, from keeping bank accounts active.

Ashok Chandra, MD and CEO of PNB, said,

“We believe waiving these charges will ease financial pressure on customers and encourage greater participation in the formal banking ecosystem.”

Why Minimum Balance Requirements Matter

Minimum average balance requirements have long been a point of contention in Indian banking. Traditionally, banks imposed these requirements to cover operational costs and encourage customer discipline.

However, penalties for failing to maintain balances have often disproportionately affected:

• Students with limited incomes.

• Daily wage earners and informal workers.

• Small farmers and rural families.

• Senior citizens relying on pensions.

For many, these charges became a barrier to financial inclusion, leading people to avoid formal banking or keep accounts dormant.

Financial Inclusion: A National Priority

Financial inclusion is a major policy goal in India, aiming to bring every citizen into the formal banking system.

The government has supported this through initiatives like:

• Pradhan Mantri Jan Dhan Yojana (PMJDY): Over 50 crore bank accounts opened, many with zero balance requirements.

• Direct Benefit Transfers (DBT): Government subsidies are transferred directly into beneficiaries’ bank accounts.

• Digital Payment Campaigns: Promoting UPI, Aadhaar-enabled payments, and mobile banking.

Moves by major banks like Indian Bank and PNB to waive minimum balance charges directly support these policy goals, making banking more accessible and affordable.

Potential Impact on Customers

Millions of account holders are set to benefit from these decisions.

Key customer groups include:

• Students: Often new to banking, they can now open and use accounts freely.

• Senior citizens: Fixed-income groups relieved from unnecessary penalties.

• Women and rural households: Easier, safer way to save and access credit.

• Small traders and shopkeepers: Can keep low-balance accounts without fear of penalties.

The waivers are also expected to encourage the unbanked population to open accounts, boosting formal savings rates.

Supporting Priority Sectors

Punjab National Bank specifically highlighted its focus on priority sectors. By removing these charges, PNB aims to support farmers, women, and low-income households, aligning with national development priorities.

This approach reflects a shift in banking philosophy from profit-first to customer-first, recognising the importance of inclusive economic growth.

Impact on Bank Operations

While waiving minimum balance penalties may reduce fee income for banks in the short term, it can generate long-term benefits, such as:

• Higher account usage and activity rates.

• Increased deposits over time.

• Greater cross-selling of financial products, like loans, insurance, and investments.

• Improved customer trust and loyalty.

It also aligns with Reserve Bank of India’s vision of a more inclusive and customer-friendly banking sector.

Lending Rate Reduction: Boosting Credit Growth

Indian Bank’s 5 basis point reduction in one-year MCLR is another step toward supporting economic growth.

Lower MCLR will benefit borrowers with floating-rate loans, reducing their EMI burden and freeing up disposable income.

This move supports:

• Affordable housing goals.

• Small and Medium Enterprises (SMEs) seeking working capital.

• Personal loan borrowers facing high costs.

With interest rates softening slightly, Indian Bank aims to spur demand for credit, supporting economic recovery post-pandemic.

Banking Sector Trend: Greater Customer Focus

The announcements by Indian Bank and PNB are part of a broader trend in India’s banking sector:

• Customer-centric policies.

• Financial inclusion initiatives.

• Digital banking innovations.

• Simplified account structures.

By removing charges and lowering lending rates, banks are making it easier for ordinary Indians to save, borrow, and transact, contributing to inclusive growth.

Conclusion

The decisions by Indian Bank and Punjab National Bank to waive minimum balance charges mark an important milestone in India’s journey toward inclusive banking.

These steps will ease financial pressures, empower customers, and encourage greater participation in the formal banking system, ensuring that no one is left behind in the country’s economic progress.

With lower lending rates and more accessible accounts, these banks are setting an example for the industry to prioritise customer needs while supporting India’s development goals.

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