Minimum Balance Requirement

Minimum Balance Requirement, also known as the Average Minimum Balance (AMB), is the minimum average balance that a bank account holder must maintain in their Savings Account or Current Account over a specified period, typically a month or a quarter.

If the balance falls below this threshold, the bank levies a penalty charge. What is the Minimum Balance Requirement? The average minimum balance is calculated by adding the end-of-day closing balances for each day in the month and dividing by the number of days in that month. For example, if the minimum balance requirement is ₹5,000 and you maintain ₹5,000 for 15 days and ₹3,000 for 15 days, your average balance is ₹4,000, which is below the requirement and would attract a penalty. The minimum balance requirement varies significantly across banks and account types. Public sector banks like SBI typically require an Average Monthly Balance (AMB) of ₹3,000 in rural areas and ₹5,000 in metro branches. Private banks like HDFC Bank and ICICI Bank may require ₹10,000 to ₹25,000 for premium Savings Accounts, though they offer higher interest rates and better services in return. Penalty for non-maintenance of minimum balance also varies. Public sector banks charge ₹10 to ₹40 per month plus applicable GST if the balance falls below the AMB. Private sector banks can charge ₹250 to ₹750 per month for non-maintenance of premium accounts. These penalties can compound significantly over a year, making it costly to keep a low-balance account. To avoid minimum balance penalties, account holders can opt for Jan Dhan Accounts (zero balance), Small Finance Bank accounts, or basic Savings Bank Accounts that do not require a minimum balance. However, these basic accounts come with limitations like a cap on deposits and withdrawals per month and may not include a cheque book. The RBI has directed banks to clearly display minimum balance requirements and penalty charges at branches and on their websites. Before opening a bank account, always verify the minimum balance requirement and the penalty for non-maintenance, as this can be an unexpected cost for students, retirees, or anyone who maintains a low balance.