Context: ICICI Bank has sharply increased the Minimum Monthly Average Balance (MAB) for new savings accounts. This has triggered debate over financial inclusion as Public Sector Banks (PSBs) move towards zero-MAB policies.
Relevance of the Topic: Prelims: About RBI's stand on Minimum Monthly Average Balance (MAB) Policy.
ICICI Bank’s Minimum Average Balance Hike
- ICICI Bank, India’s second-largest private lender, has sharply increased the Minimum Monthly Average Balance (MAB) requirement for new savings account customers effective 1 August 2025.
- New MAB levels:
- Metro & Urban: ₹50,000 (earlier ₹10,000) → 5× hike
- Semi-Urban: ₹25,000 (earlier ₹5,000)
- Rural: ₹10,000 (earlier ₹2,500)
- Exemptions:
- Basic Savings Bank Deposit Accounts
- Pensioners’ accounts
- Salary accounts
- Customers who maintain savings plus fixed deposit amount of up to ₹2 lakh with the bank.
If a customer fails to maintain the required MAB, the bank will levy a penalty equal to 6% of the shortfall amount or ₹500, whichever is lower.
RBI’s Position on Minimum Average Balance Policy:
- The Governor of Reserve Bank of India (RBI) has clarified that Minimum Average Balance (MAB) requirements do not fall under RBI regulation. Banks are free to set their own MAB thresholds, with no regulatory cap on the amount.
Why did ICICI Bank do this?
- Few customers have less than ₹50,000 MAB: Low-balance customers are not the bank’s core segment. High MAB customers are more likely to keep money parked long-term, providing a cheap source of funds.
- Low-balance accounts = high cost and low returns: These accounts still use customer service, tech infrastructure, and compliance resources but generate less revenue.
- Fraud risk: Lower-balance accounts see more mule account misuse (used for illegal fund transfers).
- Free up resources: Better service for premium customers, tech upgrades, and more fee-based product launches.
Impact on ICICI Bank:
- Limited business impact: Very few current customers fall below the new threshold.
- Applies only to new accounts; existing customers are unaffected.
Why the Backlash?
- Seen as anti-financial inclusion: Many urban customers do not even earn ₹50,000/month. Demanding they keep almost an entire month’s income idle in a low-interest savings account feels exclusionary.
- Contrast with PSBs: The hike comes while public sector banks (PSBs) are removing MAB requirements to promote financial inclusion. E.g., Multiple PSBs (PNB, BoB, Indian Bank, etc.) recently waived MAB penalties entirely.