Banks require savings account holders to maintain a minimum average quarterly balance. And if a customer fails to comply with the rule, then he is liable for the penalties charged by bank. But what exactly is this average quarterly balance? How do we calculate this? Do we need to maintain the minimum amount at all points of time with the bank? Continue reading to get answer to all these questions:
What is Average Quarterly Balance?
As the name suggest, quarterly average balance is the average of all the closing day balances in a relevant quarter. In other words, to reach at the value, add all the closing day balances for a given quarter and divide the total by number of days in the quarter.
How it is calculated?
Quarterly Average Balance = Sum total of closing day balances/ number of days in the quarter Let us understand it with the help of an example: Suppose you have Rs. 10,000 on 1st July. On 15th July, you added Rs. 2,000 to your balance and withdrew Rs. 4,000 on 10th August and added Rs. 30,000 on 17th September. In this case, quarterly average balance for the quarter July – September will be calculated as follows: Opening balance on 1st July Rs. 10,000 Closing balance on 14th July Rs. 10,000 (1) Total balance for 14 days = 10,000 * 14 = 1, 40,000 Closing balance on 15th July Rs. 12,000 Closing balance on 9th August Rs. 12,000 (2) Total balance for 26 days = 12,000 * 26 = 3, 12,000 Closing balance on 10th August Rs. 8,000 Closing balance on 16th September Rs. 8,000 (3) Total balance for 38 days = 8,000 *38 = 3, 04,000 Closing balance on 17th September Rs. 38,000 Closing balance on 30th September Rs. 38,000 (4) Total balance for 14 days = 38,000 *14 = 5, 32,000 Now, the sum total of all the balances = 1, 40,000 + 3, 12,000 + 3, 04,000 + 5, 32,000 = Rs. 12, 88,000 for 92 days Quarterly Average Balance = 12, 88,000/ 92 = Rs. 14,000 If you think that you will not be in a position to maintain average balance and there will be points of time when you balance will show zero balance, then the best option is to deposit a big amount like Rs. 1, 00,000 or so for few days. With this, you will be able to achieve the required minimum average quarterly balance. Difference in Public vs. Private Sector Banks Related to Minimum Quarterly Average Balance The major difference lies in terms of amount of minimum average balance to be maintained by the account holder. Public sector banks like Bank of Baroda, Punjab National Bank, State Bank of India, etc. generally requires a low quarterly average balance in savings bank account and the penalty charges (non-maintenance charges) are also low ranging between Rs. 50 to Rs. 100. Some banks require as low as Rs. 500 to be maintained as average balance. On the other hand, private sector banks like HDFC bank, ICICI bank, etc. require Rs. 10,000 to be maintained as minimum average balance and for some of the private banks, non-maintenance charges are even Rs. 750. The second difference lies in the average period. Generally most of the banks calculate the average balance on quarterly basis whereas few banks like ICICI do this on monthly basis. Now, if today your account has less than the minimum average balance required, just don’t worry about the penalty. Make an estimate and cover the difference in next few days.