The minimum average monthly / quarterly balance typically varies from Rs.1000 [in public sector banks] to Rs.10,000 or even more [in private sector banks]. And the penalty is around Rs.100 to Rs.500.
Let us suppose that your bank has stipulated Rs.5,000 as the Minimum Average Balance you must have in your Savings Account. Now, it is important to note that you DON'T have to ALWAYS keep at least Rs.5,000 in order to avoid the penalty. No. The operative word is "average". In other words, the average of the daily balances should not drop below Rs.5000. Let us see how to calculate this Average Balance.
Given below is an example of daily end-of-the-day balances in your account for the month of May:
01-May 3,000
02-May 5,000
03-May 8,500
04-May 7,250
05-May 7,250
06-May 7,250
07-May 7,250
08-May 7,250
09-May 7,250
10-May 7,250
11-May 7,250
12-May 7,250
13-May 7,250
14-May 7,250
15-May 7,250
16-May 7,250
17-May 7,250
18-May 20,000
19-May 3,000
20-May 1,500
21-May 1,250
22-May 1,250
23-May 1,250
24-May 1,250
25-May 1,250
26-May 1,250
27-May 1,250
28-May 1,250
29-May 1,250
30-May 1,250
31-May 1,250
Sum total of daily balance = 1,56,250
No. of days in the month = 31
Average balance = 156250 / 31 = 5,040
Extremely simple and straightforward.
Savings Accounts pay a miserly 4% p.a. interest. So it makes ample sense to keep just the bare "minimum" money in such accounts. However, to avoid paying any penalty it is a good idea to always check the 'average balance' a few days before the end of the month and deposit the required amount, if any, to take it above the minimum mark.
[By the way, there is one area where "minimum" must be avoided at all costs. Read 'Minimum Amount Due means Maximum Financial Destruction']
