Introduction
Today, we’re going to talk about a that caught me by surprise. Our two premier private banks, particularly ICICI Bank and HDFC Bank, have decided to significantly increase their Minimum Balance Requirements (MBR) for savings accounts. Read here to know what’s my perspective about MBR hike as a stock investor.
It’s a move that have sparked a lot of discussion, and for good reason I supose.
Let’s understand why these banking giants have decided to raise the minimum balance limit. You can jump straight here to know the reason.
Frankly, initially I could not understand what made them take such a move. The step looks so counterintuitive as it will only reduce the customer base.
I’ll also discuss what it means for us, the customers, if more banks starts to follow this lead (jump here to read).
About Minimum Balance Requirement
You know, for most of us, our savings account is a very person thing for us. Any negative development there seems like a silent attack on out finances.
So, when news emerged that banks were hiking the minimum balance we need to maintain, it definitely raised some eyebrows.
And to make the things worse, it wasn’t just a small tweak. ICICI Bank wanted new account holders to maintain an account balance of Rs.50,000 or higher. For a majority banking customer, it sounds insane, right?
These were substantial increases, especially from ICICI Bank’s initial announcement.
HDFC Bank also recently made headlines by hiking its minimum balance limit for savings accounts. This change means account holders now must maintain a minimum of Rs. 25,000 in their savings accounts in metro and urban areas, or face penalties. Previously, this requirement stood at Rs 10,000.
This new rule came into effect on August 1 for savings accounts opened on or after that date in these regions.
Just a day before HDFC Bank’s announcement, ICICI Bank, the country’s second-largest bank, had already increased its minimum balance limit for savings accounts.
- For metro and urban branches, ICICI Bank initially raised the MBR from Rs 10,000 to a striking Rs. 50,000 per month.
- In semi-urban areas, the MBR was increased from Rs. 5,000 to Rs. 25,000,
- In rural areas, it went up from Rs 5,000 to Rs 10,000 per month.
These changes also became effective on 01-August-2025.
The enhanced Minimum Balance Requirement (MBR) primarily applies to new savings account holders. Specifically, for HDFC Bank, the new MBR rules came into effect from August 1. It will only affect customers who opened savings accounts on or after that date.
Similarly, ICICI Bank’s revised MAB requirements were introduced for new savings accounts opened from August 1, 2025. It will not apply to savings accounts opened before July 31, 2025
Why the Big Jump?
This is the million-dollar question. When I first read this news piece, I went nuts (I was also angry). But then I realized that old customers are not effected.
Why would such prominent banks suddenly make it tougher for account holders?
The reported news articles did not say it clearly, but after you read many reports, the motivation behind these decisions becomes clear. Here is the main reason:
One primary reason was an apparent strategy aimed at filtering out low-value customers. Why so? Because bank accounts with very low balances are not as profitable for banks due to the operational costs involved in maintaining them versus the revenue they generate through transactions or deposits. By increasing the MBR, banks are essentially encouraging customers who can’t meet the higher threshold to either upgrade their balance or potentially move their accounts elsewhere.
This move also aligns with a broader trend among private lenders to attract more affluent customers.
Let’s dig deeper into the logic behind the bank’s decision.
India’s economy is growing, and with that comes an expanding segment of customers with higher disposable incomes and greater financial needs beyond basic savings.
Banks, especially private ones like ICICI and HDFC, are vying for these more financially robust relationships.
It is important to note that Indian banks’ profitability from savings accounts varies by balance size.
- Low-balance accounts (below Rs.10,000) are often unprofitable due to high operational costs (e.g., transaction processing, KYC compliance) exceeding interest income. A 2019 RBI report noted public sector banks lose money on accounts below Rs.5,000. Similarly, private banks break even around Rs.3,000–Rs.5,000.
- Fees for non-maintenance of minimum balance, like HDFC Bank’s Rs.1,500 crore in FY 2018–19, help offset some losses.
- High-balance accounts (above Rs.1 lakh) are highly profitable due to low maintenance costs and interest rate spreads (3–4% paid vs. 8–12% lent). A 2021 BCG report stated private banks derive ~60% of savings account profits from the top 20% of high-balance holders. Cross-selling to these customers further boosts revenue.
Basically, these big private banks now want only those customers who can maintain higher balances.
I think, in times to come, all big private banks would want to optimize their customer base as far as possible (as allowed by the regulator).
Banks might be looking to focus their resources on customers who bring in more value, allowing them to offer more tailored services or better returns to this segment.
ICICI Bank’s Reversal
Now, the initial hike by ICICI Bank, particularly the jump to Rs.50,000 for metro accounts, was seen by many as excessively high. It sparked widespread outrage among customers and the public. Many people felt it was a “blow to the middle-class”.
It led to questions like, “Even people with a Rs.1 lakh salary per month will not have Rs.50,000 monthly average balance because of their EMIs, bills, loans, credit card usage, etc.,” as one social media user pointed out.
Others argued that those with Rs.50,000 to spare would likely invest it rather than keep it in a savings account earning paltry interest.
This significant customer pushback was obvious.
In response, ICICI Bank quickly revised its MBR requirements. The minimum monthly average balance for metro and urban bank account holders was revised downwards from Rs 50,000 to Rs 15,000. For semi-urban areas, the requirement was reduced from Rs 25,000 to Rs 7,500, and for rural locations, it came down from Rs 10,000 to Rs 2,500.
What I think Personally?
I think that ICICI Bank intentionally hiked the MBR to Rs.50,000 first and them roll it down to Rs.15,000. Internally, they must have been calling it a masterstroke, but to me its a selfish strategy.
I can understand that these banks have their own aspirations.
But to elevate their global standing to match banks like Citi, HSBC, or JPMorgan, Indian banks like HDFC and ICICI must enhance their offerings first. I know many of you will acknowledge the pathetic mobile app and web application offered by HDFC Bank now (zero on sophistication). They are not able to make a proper app, but they aspire to be a Swiss Bank.
For instance, a 2023 Forrester report on digital banking rated HDFC’s mobile app as functional but lacking advanced features like personalized wealth management tools offered by global peers.
However, in a country like India, with a per-capita income of Rs.2,12,000 ($2,550 in 2023, per World Bank data), prioritizing premium services risks alienating 95% of customers who rely on basic banking.
Public sector banks, often less preferred due to inefficiencies, cannot fully bridge this gap.
The Reserve Bank of India (RBI) should scrutinize this shift toward premium banking.
Instead of excluding mass-market customers, banks like HDFC and ICICI could establish dedicated premium service teams while maintaining inclusive offerings. This will ensure accessibility for all without compromising aspirations for global competitiveness.
What This Means for Us
The steep MBR hikes by HDFC and ICICI signal a shift toward premium banking, potentially sidelining millions of average Indians with modest savings.
With India’s per-capita income at Rs.2,12,000 ($2,550, World Bank, 2023), maintaining Rs.15,000–Rs.25,000 balances is daunting for many, risking penalties or exclusion.
While these banks may be aiming to rival global giants like Citi, JP Morgan, HSBC’s of the world, their basic offerings and services are still only average.
This focus on affluent customers threatens to erode trust among the 95% relying on accessible banking.
The RBI must ensure banks balance profitability with inclusivity.
HDFC and ICICI should create dedicated premium teams while preserving affordable services, ensuring no Indian is left financially stranded in their pursuit of global stature.
I invite you to share your view in the comment sections below. You can also check my post on this topic on Reddit.
Note: This is me blogging about this topic as a retail customer of banks. By if l look at this news as an investor in HDFC Bank and ICICI Bank, the whole lookout will flip. Wait for my next post on this news piece as a stock investor. 🙂
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