Banks free to set minimum account balance: RBI Governor responds to ICICI hike

New Delhi: Reserve Bank of India (RBI) Governor Sanjay Malhotra clarified on Monday that the minimum balance requirement for savings accounts is not under regulatory oversight and is left entirely to the discretion of individual banks.

His remarks come amid growing discussion over ICICI Bank’s decision to increase its monthly average balance requirements for new account holders across multiple customer categories.

Speaking on the sidelines of a financial inclusion programme in Gujarat, the RBI Governor was asked about the central bank's position on ICICI Bank’s revised rules. “This decision does not fall under the regulatory domain, ” he responded.

He added that Indian banks currently maintain different thresholds, with some requiring customers to maintain Rs 10,000, others Rs 2,000, and some banks having no such requirement at all.

ICICI bank imposes steep balance rules for new accounts

According to ICICI Bank’s revised policy, which came into effect on August 1, new savings account holders in metro and urban centres will be required to maintain a monthly average balance of Rs 50,000. Those who fail to do so will face penalties of 6 percent of the shortfall or Rs 500, whichever is lower.

For semi-urban customers, the new threshold is Rs 25,000, while rural customers will need to maintain Rs 10,000. In contrast, existing account holders across these categories will continue with the previous requirement, which ranges between Rs 5,000 and Rs 10,000.

Additionally, the bank now permits only three free cash deposit transactions per month, after which customers will be charged Rs 150 per deposit.

Contrasts with public sector policies

ICICI Bank’s sharp increase in balance requirements stands in contrast to the approach taken by public sector banks and other private lenders.

The State Bank of India (SBI), the country’s largest bank, abolished its minimum balance requirement in 2020. Most other commercial banks maintain relatively lower average balance requirements, typically between Rs 2,000 and Rs 10,000, and have also moderated penalties to promote financial inclusion.

With IANS inputs