HDFC Bank Tops Penalty Charge Collections Among Major Banks in FY25

Forever News – BFSI Desk

Mumbai: HDFC Bank emerged as the highest collector of penalty charges among leading Indian banks during the financial year 2024-25, collecting ₹1,518.92 crore from various penalty-related charges. The figures highlight the significant contribution of service-related charges to banks’ non-interest income, even as the banking industry continues to focus on improving customer experience and expanding digital banking services.

According to the latest data, Axis Bank ranked second with penalty collections of ₹1,001 crore, followed by State Bank of India (SBI) at ₹418 crore, ICICI Bank at ₹391 crore, Kotak Mahindra Bank at ₹254 crore, Yes Bank at ₹120 crore, and IDFC FIRST Bank at ₹119 crore.

The numbers reflect the differing fee structures and customer policies adopted by individual banks. While some banks continue to levy charges for various account-related services such as cheque dishonours, late payment fees, non-maintenance of minimum balance in current accounts and other banking transactions, others have revised their policies to reduce the burden on customers.

Notably, State Bank of India abolished the minimum balance requirement and the associated penalty for savings bank accounts in 2020. As a result, its FY25 penalty collections are largely attributed to current accounts and other banking service charges rather than savings account penalties.

Industry experts note that penalty charges form a part of a bank’s fee-based or non-interest income, which complements income earned through lending activities. Banks generate such income from a wide range of services including account maintenance, ATM transactions beyond permissible limits, cheque returns, credit card dues, loan processing fees and other financial services.

With increasing digital adoption, banks are also redesigning their pricing strategies by encouraging customers to use digital channels while reducing dependence on branch-based transactions. Several banks have introduced premium banking packages that waive certain charges for customers maintaining higher account balances or meeting specified relationship criteria.

Consumer rights advocates, however, have often called for greater transparency in the levy of penalty charges. They argue that customers should be adequately informed about applicable fees and be provided with timely alerts before penalties are imposed. Regulatory measures by the Reserve Bank of India over the years have also focused on ensuring fair banking practices and improving customer awareness.

The data also indicates that large private sector banks, owing to their extensive customer base and diverse product offerings, continue to derive substantial fee income alongside interest earnings. While penalty charges contribute to profitability, banks are increasingly balancing revenue generation with customer-centric initiatives aimed at improving satisfaction and long-term relationships.

As India’s banking sector continues to expand through digital innovation and financial inclusion, fee-based income will remain an important component of overall revenue. However, the emphasis is expected to shift towards transparent pricing, enhanced customer service and value-added banking solutions rather than reliance on penalty-based earnings.

Penalty Charges Collected by Major Banks (FY2024-25)

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