Recently, ICICI Bank increased its minimum average monthly balance (MAB) requirement fivefold for savings account holders in metro and urban areas, setting the new MAB at ₹50,000 for new accounts, effective August 1, 2025. This move has sparked debate, with many questioning its impact on the average Indian citizen. Jay Kotak, son of Uday Kotak, criticized the decision, highlighting the economic realities for a significant portion of the population.
Kotak pointed out that a large percentage of Indians earn less than ₹25,000 per month. He stated that requiring a ₹50,000 minimum balance would mean that a sum equal to approximately 94% of an average Indian's monthly income would need to remain in the bank at all times to avoid fees. This raises concerns about accessibility to banking services for a vast majority of the population.
Income Distribution in India
The debate highlights the broader issue of income disparity in India. According to various reports, a significant portion of the Indian workforce earns meager wages. An analysis of Periodic Labour Force Survey (PLFS) data indicated that in 2023-24, a large percentage of the labor force earned very little on a monthly basis. While these figures fluctuate, they paint a picture of a nation where a substantial portion of the population struggles to make ends meet.
Data from the Ministry of Statistics and Programme Implementation estimates the average annual income in India to be ₹1,80,000, which translates to a monthly salary of between ₹15,000 and ₹20,000. However, this average can be misleading due to the skewed distribution of income, where a small percentage of the population holds a disproportionately large share of the wealth.
The Rise of Digital Banking
Jay Kotak also advocated for digital banking and the growing fintech infrastructure in India as alternatives to traditional banks for handling savings accounts. Fintech companies and digital banking systems are generally more customer-friendly and cater to a larger segment of low and middle-income individuals. With lower overhead costs and innovative solutions, these platforms can offer services without the burden of high minimum balance requirements. Kotak noted that the physical costs associated with traditional banking are high, making digital-first banking the future of India's financial system.
Financial Inclusion
The discussion around ICICI Bank's MAB hike underscores the importance of financial inclusion. Making banking accessible to all segments of society is crucial for economic empowerment and growth. High minimum balance requirements can create barriers for those with limited financial resources, potentially excluding them from the formal banking system. This can hinder their ability to save, invest, and access credit, further perpetuating economic inequality.
The Road Ahead
As India progresses, addressing income inequality and ensuring financial inclusion must be a priority. This can be achieved through a combination of policy interventions, such as promoting wage growth, expanding access to education and healthcare, and encouraging the growth of digital banking and fintech solutions. By leveraging technology and adopting inclusive policies, India can strive towards a more equitable and prosperous future for all its citizens.
