In India, most of the private sector banks charge a hefty fine on their customers for not maintaining the required Average Quarterly Balance (AQB) amount in their savings accounts. When the AQB itself is quite high at 10,000 rupees for most of the private banks, the fine comes to more than 800 rupees (including surcharge) and is not a small amount by any means.
Average Quarterly balance ( AQB ) is calculated as mentioned below :
AQB = ( The sum of the end of the day balances in the quarter ) / ( Total number of days in the quarter ) must be equal to Rs.10,000.
Banks calculate the balance of the days in the three months what it is at the end of the day. Supposedly you have 1 lakh rupees in the morning and you take out 99000 rupees during the day time, your day balance would be 1000, not 1 lakh.
To have a comparison with other countries, in Singapore, the amount banks generally charge for not maintaining the monthly average balance is 2 Singapore Dollars, which comes to around 65 Indian Rupees. And that means the AQB fine banks charge in India is 12 times that of in Singapore!!
With the AQB amount made double that of what it was previously, the probability of a person defaulting on it also increases. And when the fine is levied on a huge number of customers, it results in tremendous income for the banks, probably what they are eying at.
I guess it’s high time that the Reserve Bank of India intervenes and put an end to this day time robbery, like it put a cap on ATM withdrawal fee a year back.
In the mean time, what we can do is,
- Have less number of savings accounts as possible with private banks
- Move your savings accounts to nationalized banks, that have lower AQB and charge less default fee
