ICICI Bank shuns the mass, bets on the rich

Time of India

4 days ago

ICICI, one of India's largest and fastest growing banks, is making itself out of bounds for the hoi polloi.
The private sector bank has dramatically raised the average minimum balance that depositors in metros and urban areas have to keep in their savings bank (SB) account to ₹50,000. About a week ago, it was ₹10,000. All new customers opening accounts with ICICI from August 1, 2025 will have to maintain the higher minimum average monthly balance (MAMB).
Among the domestic banks, this is the highest minimum balance requirement. The country's largest lender
State Bank of India
had scrapped the minimum balance rule in 2020.
Most banks insist on a minimum balance to manage their day to day operations and investments, and customers are charged a penal fee if the average balance slips below the floor amount. However, for other banks, the average minimum is significantly lower, typically ranging between ₹2000 and ₹10,000.
ICICI's minimum SB account balance in semi-urban and rural branches are now at ₹25,000 (up from ₹5000) and ₹10,000 (up from ₹2500) respectively.
The corresponding numbers for
HDFC Bank
, which had emerged as the largest private sector lender in terms of assets (following the merger of the mortgage lender HDFC), are ₹10,000 (in urban and metro branches), ₹5,000 (in semi-urban branches), and ₹2500 (in rural branches).
"It is evident that ICICI is increasingly positioning itself to gain a higher share of the affluent market in India, and leverage on the relationship to cross-sell other products across this clientele. If the minimum balance is kept very low, then there could be a predominant number of customers who are not perceived as valuable by a bank. However, if a bank is selective, the chances of more fee earnings through marketing of various products like insurance and brokerage, is higher as there would be more takers for such offerings in a pool of richer customers," said a senior banker.
The ICICI spokesperson did not elaborate on the reasons behind the bank's decision to sharply increase the minimum balance amounts.
Most money managers believe that as the total GDP grows, the distribution of wealth would be skewed-as a result more and more banks and financial institutions would be trying to have a foothold in wealth management. Banks are already facing competition from mutual funds, portfolio management service providers, and private equity and venture capital funds in attracting wealthy savers.
Indeed, in striking a balance between banks chasing the mass affluent and the urgency to draw unbanked citizens under institutional finance, all high-street banks were told more than a decade ago to convert their 'no-frills' accounts into Basic Savings Bank Deposit accounts (BSBDAs). Under the Reserve Bank of India (RBI) guidelines, banks do not stipulate any minimum balance requirement for BSBDA , including accounts opened under Pradhan Mantri Jan DhanYojana (PMJDY). According to the central bank's Master Circular on 'Customer Service in Banks' dated July 1, 2015, for accounts other than BSBDAs banks are permitted to fix service charges on various services rendered by them, as per their board approved policy, while ensuring that the charges are reasonable and not out of line with the average cost of providing these services.
The interest returns on SB accounts typically varies between 2.5% and 5% in the banking industry.