As we all know maintaining ‘Minimum Average Balance’ in saving bank account is must in most of the banks these days. So when my friend went to open a saving bank account with ICICI bank, the bank executive ask him to maintain a minimum average balance of Rs 10,000 in saving bank account to avoid penalty. Like most of us he understood that he needs to maintain atleast Rs 10,000 in his saving bank account every day else bank will charge penalty from him.
This is a misconception between most of the account holders that if there account balance will go below the minimum balance requirement set by the bank any day then bank will deduct penalty charges from there account. But this is not how bank calculates minimum average balance on each saving account.
Minimum Average Balance
Minimum average balance means the average balance of the whole month or quarter. To calculate average balance of a saving bank account, bank takes the minimum account balance of each day and then divide that sum with the number of days of that month to get the average balance of that month.
Minimum Average Balance = Sum of all the EOD closing balance / Number of days in that Month
If the average minimum balance of your saving bank account comes out to be Rs 10,000 then bank will not charge any penalty even if your account balance was as low as Rs 2000 or so in-between the month.
Lets have an example to understand this concept in detail
Lets say you have Rs 15,000 in your saving bank account on the first day of August. Lets see how your account balance moves during the month and what is going to be your monthly average balance at the end of the month.
On adding the EOD balance of each day of August the total comes out to be 3,60,000 then putting values in formula,
Minimum Average Balance = 3,60,000 / 31
Minimum Average Balance = 11,613
In the above example, the opening balance amount at the beginning of the month was Rs 15000 which then reduced to Rs 11000 on withdrawal of Rs 4000 on Aug 7 and so on. After all the withdrawal and deposits during the whole month account holder manage to maintain the minimum average balance of Rs 10,000. So in this case bank will not deduct any penalty even if the account had Rs 8000 and Rs 2000 for 6 days and 4 days respectively in the month of August.
Both public and private sector banks have a minimum balance requirement set by them which needs to be maintained by each account holder. In some banks you have to maintain minimum average balance every month whereas some banks maintain quarterly average balance. Here I have listed some of the banks with there minimum average balance requirement :
Minimum Average Balance
Monthly / Quarterly
|State Bank Of India (SBI)||Zero||–||–|
|ICICI Bank||Rs 10,000 (U) Rs 5000 (R)||Monthly||Rs 250|
|Axis Bank||Rs 10,000||Quarterly||Rs 750|
|HDFC Bank||Rs 10,000||Monthly||Rs 250|
|Bank Of India||Monthly||Rs 20|
|Bank Of Baroda||Rs 1000 (U) Rs 500 (R)||Quarterly||Rs 100 (U) Rs 50 (R)|
|Punjab National Bank|
|Citi Bank||Monthly||Rs 500|
|Canara Bank||Rs 1000 (CB) Rs 500 (WCB)|
|Union Bank Of India||Rs 1000 (CB) Rs 500 (WCB)|
*U – Urban Area, *R – Rural Area, *CB – Cheque Book, *WCB – Without Cheque Book