ICICI Bank is India’s second largest private bank. It has increased the minimum balance for urban customers to Rs 50,000. Penalty will be levied if the average monthly balance of the savings account is less than this
In the financial year 2024-25, the gross per capita income in India was Rs 1,31,566. This is 5.44 percent more than a year ago and 23 percent more than five years ago. Companies from soap to mobiles say that the demand for products which are considered premium is higher than the products considered basic. The K-shaped recovery in the Indian economy has affected people’s spending habits. This has supported the trend of premiumization. Now this effect is also visible on banking.
ICICI Bank is India’s second largest private bank. It has increased the minimum balance for urban customers to Rs 50,000. Penalty will be levied if the average monthly balance of the savings account is less than this. Minimum balance requirement has been a part of the business of all banks. But the way ICICI Bank has increased the minimum balance is a bit surprising.
Analysts say that ICICI Bank wants to focus on those customers who have higher income and who spend more rather than the larger part of the population. This is wise from the point of view of a bank as it will not have to face credit related issues in the future. Most banks want to give loans to those who already have a deposit account or some kind of relationship with the bank. This eliminates the need to focus on the credit risk profile of know-your-customers, as their transactions with the bank are already taking place.
This means that a person who can maintain a monthly balance of Rs 50,000 will have an attractive credit profile. In view of the kind of pressure that has been seen on the retail credit of banks recently, ICICI Bank’s decision to increase the minimum balance is correct. From this, it can be said that premiumization has started in the case of bank accounts as well.
While considering ICICI Bank’s decision to increase the minimum balance, it is important to keep two things in mind. This is the monthly average balance, which the depositor has to maintain. If there is a very high balance in the account for some days, then the average minimum balance is maintained.
Second, this rule is for those customers who open an account in the bank on or after August 1. The minimum balance will remain low for old customers. The bank is not ending its relationship with its old customers due to low average minimum balance, but it wants to focus on premium customers in future.
Can other banks also do this?
It is difficult to say anything clearly about this right now because increasing the minimum balance will affect the growth of depositors. After this decision, ICICI Bank will see how the growth of its low-cost savings account deposits remains. CASA (Current Account Savings Account) growth of banks has been weak for a long time. ICICI Bank can withstand the impact of this change with its strength, but many other banks do not have such strength. Apart from this, it will also affect the net interest margin, which is already under pressure.
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