As always I am left to wonder if people actually try to understand all the angles before they start accusing of someone trying to rob someone else. Let me explain the other angle of this. The caveats on the below are - one, it tries to simplify the banking business to try and do an ELIF and two, read only if you can set politics, corruption etc aside for a moment.
I have worked for couple of banks. One of these banks, we had a training for developers - "Fundamentals of banking" and the MAB/MQB question was one of the hotly debated question towards the end of the session. The instructor had a simple way of explaining this- What is a function of any business? To make money. So what does a bank needs to do? Make money. And how do they do it? They rake in the difference between paying interest on saving accounts vs taking in interest in lieu of loans (this currently is ~8% on FD - ~4% on savings = 4% or larger in case of EMIs, housing loans etc).
But there are costs which banks have to bear too, while all savings are considered to be safe, as in money in hand, loans are not. So banks take a risk ie if they get one large loan wrong they wipe out all the commissions made on a very large number of saving accounts.
The 2nd cost is they have a very strict requirement on liquidity ie money in hand if there is a sudden surge in demand for withdrawal. So not all the savings can be converted to loans.
The third problem, specially in India, is the public benefit requirement ie opening and operating branches in places where they are not actually going to make profits but they have to. So their profit capacity is eroded further. There also schemes like Jan Dhan Yojna etc where they have to provide services while the account has 0 balance.
The fourth problem, record keeping, they need to maintain records for all transactions for a very long amount of time ~5-7 years. This is to ensure agencies can do forensic accounting and have a trace of all transactions in case something like money laundering is detected.
The fifth problem, postage. They need to spend money on cards, pin postage, sure they cost might not be high but it stacks up quickly because of "economics of scale".
Sixth, the outflow of money in terms of branches, ATMs, people, customer support, tech support, KYC document maintenance and whole lot of other things.
There were other but I can't remember.
All in all, banks expect to be able to make a certain amount of money from the difference of "interest rates". This is not like the "perfect law of thermodynamics" where money in = money out. Rather there are costs associated with it as explained in 5-6 points above.
The banks work backwards from this information and set an average profit expectation from accounts in lieu of the services they are providing. From this average profit expectation combined with interest rate change expectation and average loan risk, they work out an amount they need accounts to have for them to be able to make a profit ie the MQB/MAB. They also take cognizance of the income level difference between metro and rural areas, hence instead of putting a flat expectation, they have a tiered structure. So instead of everyone being worse off, only some are.
What happens if the profit per account expectation is not met? They put a fine. While deciding on the fine, they also have a prisoner's dilemma. If they fine is too low, people are going to ignore it and still not maintain the required balance, if it's too high, well this thread will be longer by 50 pages. So they put a fine which includes the profit expectation + encouragement to people to try and maintain the required balance.
