Explanation of ICICI Bank's Decision to Substantially Increase Minimum Account Balance Requirement for New Account Holders
ICICI Bank has announced a significant increase in the minimum monthly average balance (MAB) requirements for new savings bank accounts, effective from August 1, 2025. The changes aim to incentivize higher-balance accounts and offer related benefits, but have sparked criticism and concerns about accessibility and inclusivity in banking services.
The new MAB requirements vary across metro, urban, semi-urban, and rural branches. For metro and urban branches, the MAB has increased from Rs 10,000 to Rs 50,000; for semi-urban branches, from Rs 5,000 to Rs 25,000; and for rural branches, from Rs 2,000-2,500 to Rs 10,000.
The bank's stated reasons for this move include encouraging higher-balance accounts and offering related benefits such as free NEFT transfers and free cash transactions up to a limit. However, the Reserve Bank of India (RBI) clarifies that it does not set these limits for banks, leaving minimum balance requirements to the banks' discretion.
Consequences of the move include penalties for non-maintenance, impact on customers, shift in customer behavior, and exemptions. Customers failing to maintain the new MAB will incur a penalty of 6% of the shortfall or Rs 500, whichever is lower. This sharp increase primarily affects new customers opening accounts after August 1, 2025, especially in rural and semi-urban areas—where the balance hike is proportionally large.
Many users and consumer advocates have criticized the move as "elitist" and a form of filtering based on wealth, with calls for RBI intervention. The increased MAB may prompt some customers to reconsider their banking choices, with possibilities including switching to banks with lower or no minimum balance requirements or opting for zero-balance basic savings bank accounts that remain exempt from these requirements.
Certain accounts such as salary accounts, PM Jan Dhan Yojana accounts, and basic savings bank deposit accounts are exempt from these MAB requirements, maintaining their zero-balance facility. The new guidelines will come into effect from a prospective manner, meaning rules do not change for existing customers.
Notably, the RBI Governor has stated that ICICI Bank's ₹50,000 minimum balance rule is not under their regulatory domain. The civil society forum has written a letter to the government in protest against ICICI Bank's increase in minimum balance requirement for savings accounts. Kotak Mahindra Bank's Jay Kotak has also criticized ICICI Bank's minimum balance requirement increase publicly.
In summary, ICICI Bank's decision to significantly raise the minimum average balance to target higher deposit thresholds could enhance the bank’s deposit base and profitability but risks alienating lower-income customers and triggering criticism about accessibility and inclusivity in banking services. Other banks, such as mid-sized banks offering savings account rates of up to 7% and waiving off fees for basic banking transactions, may benefit from this shift in customer behavior.
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