Negative balances in savings accounts due to penalty charges are now history following a directive from the central bank. The RBI has asked banks to stop imposing charges for non-maintenance of minimum balance once the balance in a savings account touches zero.
Although the norms came into effect last year, some banks were continuing with the practice of creating negative balances in savings accounts until recently. According to the RBI, if any bank continues to debit charges on a savings account creating a negative balance, customers can approach the banking ombudsman. Most banks contacted by they do not create a negative balance in savings bank accounts.
Savings accounts usually go into negative balances when the customer changes his job and his ‘salary account’ ceases to receive funds. Most banks offer special facilities for salary accounts, waiving the minimum balance requirement. But when the customer quits his job, the account ceases to be a salary account and the bank begins to apply minimum balance requirements. Since there is no regular salary flowing in, The bank begins to debit a penalty for non-maintenance of minimum balance, which often results in the balance turning negative. Although banks do not pursue recovery of the amount due under negative balance accounts, the customer stands to lose if he deposits funds into the account.