How to Calculate Quarterly Average Balance in Indian Banks

                            AMB (Average Monthly Balance)

Do you understand what is the meaning of Minimum Quarterly Average Balance in your saving account? When you say “Quarterly Average Balance of your saving bank account is Rs 10,000″ , what does it mean exactly? A lot of people feel that their balance in saving bank account should not go below Rs 10,000 on any given day, otherwise there will be penalty charges and they make sure that they have a buffer of Rs 10,000 in their saving bank account all the time. This means that their account always have that much surplus. However the way quarterly average balance is calculated is different and very simple.

Meaning of Quarterly Average Balance ?

 

It simply means the average of the all the closing day balance in a given quarter. So given a quarter, add up all the closing day balance and then divide it by the number of days in the quarter. If you have to put it as formula it would be
QAB = (Total of all the EOD closing balance)/(number of days in quarter)
Let me show you an example . Let us say the quarter we are talking about is Apr-June . Now your balance in the start of the quarter (Apr 1) is Rs 20,000 . You withdraw 15,000 on 15th Apr and then Deposit 8,000 on 12th June. What will be the quarterly average balance for the Apr – June Quarter ?

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Learnings & Tips

• Keeping Rs 30,000 in a bank account for 1 full month , is same as keeping 10,000 for full 3 months (30k * 30 days = 10k * 90 days)

• If you want to keep ZERO balance in your account for most of the time, then the best thing would be to put a big amount like 90,000 for first 10 days of a quarter Q1 and then do a FD for 5 months , and then once it matures, you will be in Q2 end , and then you can put it for another 10 days , this way you will meet quarterly balance for both Q1 and Q2 .

PSU Banks vs Private Banks

A lot of PSU banks like SBI bank, Bank of India , Allahabad bank generally have a lower Quarterly Average Balance to be maintained in saving bank account, it average limit is upto Rs 500 in most of the banks and non-Maintenance Charges are very low around Rs 50-100 only. However Private banks like ICICI Banks, HDFC bank, Axis Bank etc have quarterly balance as high as Rs 10,000 and high charges as penalty for not maintaining it , It some times can be as high as Rs 750 . Note that ICICI Bank has recently moved to Monthly Average Balance (which I came to learn when I was writing this article and thanks to everyone that I knew it as I have my account in ICICI bank only)
Did you knew how the minimum average balance is calculated ? Now will this information impact your banking in any way ? Will you keep less money in your bank account because you now understand that quarterly average balance is calculated in a different way than you thought?