ICICI Bank has created a stir by raising its minimum monthly average balance (MAB) five-fold to ₹50,000 for urban customers and to ₹25,000 for new semi-urban ones, while for rural accounts the MAB requirement doubles to ₹10,000. Defaulting account holders will have to pay a penalty of 6 percent of the shortfall or ₹500, whichever is lower. Oddly, the move comes at a time some public sector banks are becoming more accessible by removing minimum balance requirements altogether. Those like SBI and Punjab National Bank do have minimum MABs, but have done away with penalties for default. Most private banks required a minimum MAB of ₹10,000. Predictably, ICICI Bank has drawn flak for the change. Customers have called out the move on social media as ‘elitist’ and ‘discriminatory’, pointing out the minimum balance is higher than the average monthly salary in India. Others have said these are barriers to deliberately exclude the middle and lower classes.
As a business choice, ICICI Bank seems to be moving away from mass banking to preferential services for a higher income bracket. By limiting access only to bigger-ticket account holders, it should be able to provide more targeted services and benefit from higher average transactions. Administratively, it would save the bank a considerable sum as every physical transaction through a branch—a preferred option for many small-ticket transactions—is estimated to cost ₹24. On the other hand, each online transaction costs just ₹2-3.
However, for a developing nation, a bank initially nurtured with public money making itself less accessible by tweaking MAB norms is unfortunate. Banking, like many other public services, is also a social vehicle that provides access to credit and digital transactions for the teeming millions. RBI Governor Sanjay Malhotra has clarified the regulator cannot compel the bank to change its MAB norms. Maybe it’s time to review the onus of rural banking, or banking for the poor, on the state-run banks. Banking may take a leaf from telecom, which tried to bridge the digital divide by instituting a universal service obligation to extend services to commercially less viable areas. Meanwhile, ICICI Bank could review its stance before transiting to become a ‘rich-only’ bank.