If you think that banks are only into the customer acquisition game, think again. Some of the new private sector banks are weeding out accounts (read: closing accounts) as fast as they are acquiring new accounts.
ICICI Bank has identified around 500,000 accounts that can be weeded out. For UTI Bank, the figure is around 100,000-150,000.
HDFC Bank has already closed around 200,000 accounts between January and March, 2003. Each of these open around 100,000-200,000 accounts per month.
The most common reason for banks asking their customers to move out is the lower-than-minimum balances kept in the accounts. Most of these banks stipulate a minimum balance of around Rs 5,000 per quarter.
Another reason is too many transactions in some of the savings bank accounts, making it a virtual current account. Those accounts which have a large number of cheque returns too are put under the scanner.
The closure of these accounts are over and above the normal accretion of accounts experienced by these banks.
HDFC Bank opens around 130,000 accounts per month and has a customer base of around 33 lakh (3.3 million). ICICI Bank has a base of around 47 lakh (4.7 million) accounts with around 200,000-250,000 accounts being opened every month.
"We are looking at how to get a greater value out of our customers. We have identified some accounts that may be weeded out. We are now looking at fully extracting value from our relationships with the customers. Even though some of the customers maintain lower balances, they may be profitable if they have other relationships with us like having a car loan or a housing loan," said an ICICI Bank official.
An HDFC Bank official pointed out: "There is a cost of servicing an account if you take into consideration the services offered like anywhere banking, ATMs, phone banking, net banking, etc. But customers are not charged for them.
"Even though Rs 5,000 is the minimum balance, the average balance kept in the accounts is at around Rs 12,000. At the minimum balance of Rs 5,000, maintaining these accounts is a loss-making proposition."
The bank looks at the performance for the last two quarters before taking a decision on weeding out the customer.
Said a UTI Bank official, "Most of the accounts have been in-operative over a period of time. There is a price for carrying these redundant accounts too."
The weeding out exercise is virtually non-existent in public sector banks. However, foreign banks are very aggressive in doing this.
"Most of the banks have been looking at acquisitions of the customers to build a base rather than profitability of the customers. Now as the critical base has been built up, they can look at weeding out the accounts which do not meet the mark," said an industry source.