Banking Central| ICICI Bank’s Rs 50,000 MAB move: A bold bet or a blunder? Let the market decide

ICICI bank's decision to up minimum balance for urban customers is a bold move, yet risky.

In a country where banking is as personal as chai, ICICI Bank’s decision to raise the minimum average balance (MAB) to Rs 50,000 for new savings accounts in metro and urban branches from August 1 has set off a firestorm of condemnation.

Social media is flooded with angry message, with some accusing the country’s second biggest private bank of “daylight robbery” and others mocking ICICI for acting like India’s already a $10 trillion economy. Let’s cut through the noise: ICICI is a private bank not a charity. It’s the bank’s prerogative to set terms to suit its business model.

If you don’t like it, there’s a free market out there — you can choose what works the best for you. The question is if ICICI’s gamble will pay off or backfire. A quick look at the industry shows, the Mumbai headquartered  bank is an outlier not a villain.

Premiumisation comes to banking

Here are some facts. Banking isn’t a social service. It’s a business balancing costs, profits, and customer goodwill. ICICI’s move screams premiumisation, targeting high-net-worth clients who can park Rs 50,000 without blinking. Metro branches now demand Rs 50,000 MAB, semi-urban Rs 25,000, and rural Rs 10,000, a 400 per cent jump from the earlier Rs 10,000, Rs 5,000 and Rs 2,500, respectively.

Fail to comply and you’re hit with a penalty. Six percent of the shortfall or Rs 500, whichever is lower. It’s steep, no doubt, but ICICI’s betting on affluent customers who’ll stick around for premium services, offsetting the loss of mass-market depositors.

IF you compare this to the industry, ICICI stands alone. State Bank of India (SBI), the big daddy of Indian banking, scrapped MAB requirements in 2020, offering zero-balance accounts to all.

HDFC Bank, the private sector giant, sticks to a modest Rs 10,000 for metro/urban, Rs 5,000 for semi-urban and Rs 2,500 for rural branches.

Axis Bank asks for Rs 12,000 in urban areas, while Kotak Mahindra and IndusInd hover around Rs 10,000. Public sector banks such as Canara, Bank of Baroda and Punjab National Bank have waived MAB penalties entirely, chasing financial inclusion over profits.

Even private players like Yes Bank and DBS Bank India keep MAB at Rs 10,000. ICICI’s Rs 50,000 is a moonshot, making it the priciest among major domestic banks.

Having said, the backlash is predictable.

Let market be the judge

Critics argue ICICI’s move is elitist, alienating the middle class in a country where 90 percent earn less than Rs 3 lakh a year. With monthly incomes of Rs 40,000–50,000 needed to comfortably maintain Rs 50,000 MAB, it’s a stretch for most.

Yet, ICICI Bank’s move is not bereft of logic. Rising branch costs, digital banking investments and a 0.25 percent savings rate cut to 2.75 percent show they’re squeezing margins. Targeting high-value clients makes sense when fintechs and digital wallets are eating into retail deposits.

Will it work? The market will decide. If customers flee to SBI or digital banks, ICICI Bank’s CASA ratio could take a hit. But if premium clients bite the bullet, ICICI Bank could laugh its way… to the bank. Customers can check options, compare MABs and choose what works the best for them. Banking’s a game of choice, not charity.

(Banking Central is a weekly column that keeps a close watch on and connects the dots regarding the sector's most important events for readers.)