ICICI Bank Sharply Hikes Minimum Monthly Balance to Rs 50,000: Check Penalty Rates for Non-Compliance
In a significant move, ICICI Bank, India’s second-largest private lender, has raised the minimum monthly average balance (MAB) requirements for new savings accounts, effective August 1, 2025. The new MAB for accounts opened in metro and urban areas has surged from Rs 10,000 to Rs 50,000, marking a five-fold increase. This change, alongside hikes in semi-urban and rural areas, has sparked widespread discussion among customers and analysts. Here’s a detailed look at the revised rules, penalties for non-compliance, and what this means for account holders.
Revised MAB Requirements
ICICI Bank has introduced the following MAB thresholds for new savings accounts (non-salary) opened on or after August 1, 2025:
- Metro and Urban Areas: Rs 50,000 (up from Rs 10,000)
- Semi-Urban Areas: Rs 25,000 (up from Rs 5,000)
- Rural Areas: Rs 10,000 (up from Rs 2,500)
Existing account holders are unaffected, with their MAB requirements remaining at the previous levels (Rs 10,000 for metro/urban, Rs 5,000 for semi-urban, and Rs 2,500 for rural). This steep hike positions ICICI Bank as having the highest MAB requirement among domestic banks, outpacing peers like HDFC Bank (Rs 10,000 for metro/urban) and Axis Bank (Rs 12,000 for metro/urban).
Understanding MAB and How It’s Calculated
The minimum monthly average balance (MAB) is the average of your daily closing balances over a calendar month. It’s calculated by summing the closing balance for each day of the month and dividing by the number of days. For example, in a 30-day month with an MAB requirement of Rs 50,000:
- Maintaining Rs 50,000 daily results in an MAB of Rs 50,000.
- Keeping Rs 15,00,000 for one day and Rs 0 for the remaining 29 days also yields an MAB of Rs 50,000 (15,00,000 ÷ 30 = 50,000).
This flexibility allows account holders to strategically manage their balances to meet the requirement without keeping the full amount every day.
Penalties for Non-Compliance
If the MAB falls below the required threshold, ICICI Bank imposes a penalty of 6% of the shortfall or Rs 500, whichever is lower. For instance:
- A shortfall of Rs 10,000 in a metro branch would incur a penalty of Rs 600 (6% of 10,000), but it’s capped at Rs 500.
- A shortfall of Rs 5,000 results in a penalty of Rs 300 (6% of 5,000).
Certain exemptions apply:
- Family Banking: If the family collectively maintains 1.5 times the program’s eligibility amount, individual MAB penalties are waived.
- Pensioners: No MAB penalties are charged.
Additional Charges and Revised Rules
ICICI Bank has also updated its cash transaction and cheque-related policies:
- Cash Deposits: Three free transactions per month, up to a cumulative limit of Rs 1 lakh. Beyond this, charges are Rs 150 per transaction or Rs 3.5 per Rs 1,000, whichever is higher. Third-party deposits are capped at Rs 25,000 per transaction.
- Cash Withdrawals: Three free withdrawals per month; standard charges apply thereafter.
- Cheque Returns: Rs 200 per instance for outward returns (cheques deposited by customers) and Rs 500 for inward returns (cheques issued by customers) for financial reasons. Non-financial reasons (e.g., signature issues) incur a Rs 50 fee for inward returns.
- ECS/NACH Debit Returns: Rs 500 per instance, capped at three charges per month for the same mandate.
- Declined Transactions: Rs 25 per instance for transactions declined at another bank’s ATM or POS due to insufficient funds.
Why the Hike?
ICICI Bank’s decision reflects a strategic shift toward premiumization, targeting high-net-worth and mass-affluent customers who are more likely to engage with additional financial products like insurance and investments. Banking analysts suggest this move aligns with rising operational costs and competition from non-banking financial institutions, such as mutual funds and private equity firms. The bank also reduced savings account interest rates by 0.25% in April 2025, with balances up to Rs 50 lakh now earning 2.75% and those above earning 3.25%, following similar cuts by HDFC and Axis Banks.
How Does ICICI Compare to Other Banks?
ICICI’s new MAB requirements dwarf those of its peers:
- HDFC Bank: Rs 10,000 (metro/urban), Rs 5,000 (semi-urban), Rs 2,500 (rural).
- Axis Bank: Rs 12,000 (metro/urban), Rs 5,000 (semi-urban), Rs 2,500 (rural).
- State Bank of India (SBI): Eliminated MAB requirements in 2020.
- Other Public Sector Banks: Many, including Canara Bank, Bank of Baroda, and Punjab National Bank, have waived MAB penalties in 2025, with public sector banks collecting Rs 8,932.98 crore in such penalties from 2020–2025.
This contrast highlights ICICI’s outlier status, as most banks maintain MABs between Rs 2,000 and Rs 12,000 or have eliminated them to enhance financial inclusion.
Impact on Customers
The hike applies only to new accounts, sparing existing customers for now. However, it may deter middle-income individuals from opening accounts with ICICI, pushing them toward banks with lower or no MAB requirements, like SBI. The move could also prompt other private banks to follow suit, potentially reshaping the banking landscape. For basic banking access, RBI mandates that Basic Savings Bank Deposit Accounts (BSBDAs), such as those under the Pradhan Mantri Jan Dhan Yojana, have no MAB requirements, though these accounts come with transaction limits.
Posts on X indicate customer frustration, with some calling the Rs 50,000 MAB “unrealistic” for average savers and urging a shift to banks with more lenient policies. Others speculate that ICICI is prioritizing wealthier clients to boost profitability.
Tips to Avoid Penalties
- Monitor Your Balance: Use ICICI’s Internet Banking or Mobile Banking to track your MAB under “Bank Accounts > Monthly Average Balance details.”
- Strategic Deposits: Deposit larger sums periodically to meet the MAB without maintaining the full amount daily.
- Explore Exemptions: Enroll in Family Banking or check if you qualify for pensioner benefits.
- Consider Alternatives: If the MAB is too high, explore banks like SBI or BSBDAs for no-MAB options.
- Budget for Fees: Account for potential penalties or transaction charges when planning finances.
The Bigger Picture
ICICI’s MAB hike signals a broader trend among private banks to cater to affluent customers amid India’s growing wealth disparity. While this may boost profitability, it risks alienating middle-class savers, especially as public sector banks move toward waiving MAB penalties. Customers should weigh their banking needs and explore alternatives to avoid unnecessary fees. For the latest details, visit ICICI Bank’s official website or consult a financial advisor.
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