Lesser known facts about minimum balance in savings account

Minimum balance in savings account is the mandatory lower limit of money prescribed by a bank. This means that if account holder at any given point of time dips below the prescribed limit, he would not be liable to receive the benefits like denied interest payments and may even have to pay a penalty. A customer earns his interest based on the minimum average balance maintained in the account and the same may vary from bank-to-bank.

Earlier when the Reserve Bank of India (RBI) introduced the concept of savings bank accounts with a minimum balance. This gave the banks the authority to charge customers with a requisite or pre-determined amount if the customers failed to maintain the balance.

Compared to private sector banks, most public sector banks are known for maintaining savings accounts with a lower limit of money. If a minimum balance is not maintained in the account, the customer is liable to pay charges on non-maintenance of AMB as applicable. While some Public sector banks levy a charge anything between Rs 30 and Rs 500 for non-maintenance of minimum balance in savings account, private sector banks charge from Rs 500 to Rs 750. This compulsory lower-limit balance is also known as the Average Monthly Balance (AMB) or Average Quarterly Balance (AQB) and it is generally higher in urban areas than in semi-urban and rural areas.

The penalties are charged in proportion to the extent of shortfall observed. Secondly, several banks require customers to maintain a minimum balance for a digital savings bank account as well.

Before we proceed on other important points, it is important to understand why banks levy this mandatory lower-limit amount on account holders. Remember, these brick-and-mortar banks require high-value maintenance. This means they have to make heavy investments in setting up branches and ATMs, payment of staff and back-office operations, maintaining call centres, and much more. And they have their ways of meeting these expenses.

If the above gives you the impression that banks are siphoning off their customer’s money to meet their expenses, then we would like to tell you that this is not the case. On the contrary, they help the customers maintain the mandatory lower limit by providing them online banking and sends them SMS alerts if the amount goes below the limit.  Apart from this, some banks are also known to waive off the minimum balance in savings account if the account holder has a fixed or recurring deposit for about a year with the bank.

Join us for more on savings bank accounts and minimum balance penalisation on https://savingaccount.in/blog/digital-bank-account.