Business IdeasForeign banks hike minimum balance for savings accounts
Aim at closing inactive accounts and increase low-cost deposits
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In an attempt to weed out inactive accounts and increase low-cost deposits, foreign banks are increasing the minimum balance that customers need to hold in their savings accounts.
Citibank, the country’s largest foreign lender, has hiked the average monthly balance requirement from Rs 10,000 to Rs 25,000 for its Suvidha savings account customers from November 1. British lender Barclays Bank hiked its minimum balance requirement from Rs 10,000 to Rs 25,000 earlier this year. This brings both banks on par with Standard Chartered, which hiked its minimum balance requirement in December last year, as did HSBC. ABN Amro is one of the few foreign banks which has left its minimum balance requirement untouched at Rs 10,000.
Saru Kaushal, Business Manager-Suvidha at Citibank India said: “Citibank Suvidha is designed as a zero minimum balance account and continues to remain so. The monthly relationship value is a requirement that applies only when there is an interruption in salary credit... Suvidha account holders can choose to maintain the net relationship value across a bouquet of products comprising savings account balance, fixed deposits, mutual funds and insurance premium paid.”
“Most foreign banks are doing it to weed out inactive accounts and attract the right kind of customers, since most foreign banks target premium customers. Banks also want to encourage the right kind of behaviour among customers,” said a senior executive of a leading foreign bank.
“Foreign banks do not have the branch network that Indian banks do to access low-cost deposits. And since every transaction costs money, accounts with a minimum balance of Rs 10,000 are not remunerative,” said another foreign banker.
All banks, including foreign lenders, are required to offer a minimum number of no-frills account with zero minimum balance requirement. However, such accounts come without basic features such as free ATM-and-debit card and free cheque books.
The country’s second largest private sector lender, HDFC Bank, raised its minimum balance requirement to Rs 10,000 for urban savings account customers in March this year.
ICICI Bank also raised its minimum balance requirement to Rs 10,000 last year.