No negative balances in savings accounts: RBI (2024)
MUMBAI: 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 TOI said that they do not create a negative balance in savings bank accounts. Savings accounts usually o into negative balances when go into negative balances when the customer changes his job and his `salary account' ceases to receive funds, and the bank begins to apply minimum balance requirements. The bank begins to debit a penalty, 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.
In response to an email sent by TOI, HDFC Bank said it “does not allow the balance in a savings account to go negative due to imposition of charges for non-maintenance of minimum balance“. The statement added that there are no charges for reactivation of the account in future. Axis Bank said that it does not accumulate charges for non-maintenance of balance. An ICICI Bank spokesperson also said that it does not create negative balances in savings accounts.
In the past, RBI had directed banks to ensure that balances in accounts do not turn negative because of imposition of penalty charges for not maintaining minimum balances. Despite this, there have been instances of banks continuing to impose penal charges.
Pridhi Singla, a lawyer at the Punjab and Haryana High Court, says, "The RBI issued guidelines in 2014 asking banks not to make the account balances negative solely on account of penal charges for non-maintenance of minimum balances in savings accounts.
If you decide you want to close your bank account while it's negative, the bank could refuse and ask you to pay the balance first. But banks don't keep negative accounts open indefinitely. If you overdraw an account too many times or let an account stay negative for too long, your bank will likely close the account.
A negative balance occurs when you make payments that exceed the funds in your account. Overdraft protection can help cover the difference, but it comes with fees. A negative bank balance can lead to overdraft fees, non-sufficient funds fees, account closure, and credit impact.
A negative fund balance is a common occurrence in the equity markets. It often happens when traders execute orders, but they don't have enough money in their accounts to cover all the costs. There can be several reasons why an account could end up with a negative balance after executing a market order.
If you don't know about an overdrawn account or ignore it, the bank could eventually take legal action against you. The amount your account is overdrawn is a legal debt you owe, which means the bank can sue you and use legal remedies such as wage garnishment to get the money.
Your bank may close your account and send you to collections if you're always in overdraft and/or don't bring your account up to date. An overdraft occurs when your account falls below zero. Your bank will let your account become negative if you have overdraft protection but you may face fees.
A business can report a negative cash balance on its balance sheet when there is a credit balance in its cash account. This happens when the business has issued checks for more funds than it has on hand.
Introduction: My name is Carlyn Walter, I am a lively, glamorous, healthy, clean, powerful, calm, combative person who loves writing and wants to share my knowledge and understanding with you.
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