How Are Average Quarterly Balances Determined for Current Accounts?

 

Many people are confused as to what exactly an average quarterly balance is. To put it simply, it’s the average of all the closing day balance of a business current account in a given quarter. Typically, there is a minimum balance that is required to maintain a current business account. The current account minimum balance will vary across different banks, and may also be influenced by the account holder’s location or category of accounts.

 

Location can be classified as urban, semi-urban and rural; while category of accounts can be defined as normal, privilege, platinum, etc. It is essential to know that the minimum balance doesn’t have to be maintained each day, but only on a quarterly average basis. What would a quarterly average balance of Rs. 10,000 mean? It means you have to maintain Rs. 10,000 in your account daily on average. Additional emphasis has to be placed on the word average. In the following points, we will discuss how to calculate the average quarterly balance for current accounts:

 

  • Let’s assume hypothetically that the opening balance at the beginning of the quarter is Rs. 8,000 as of 1st October.
  • You maintain a balance of Rs. 8,000 in your account for the next 14 days from 1st October to 14th October. So, the total balance for 14 days is (14*8,000) = Rs. 1,12,000.
  • For the next 23 days, from 15th October to 6th November, you maintain a balance of Rs. 18,000. The total balance maintained for 23 days will be (23*18,000) = Rs. 4,14,000.
  • Let’s say for the next 27 days, from 7th November to 3rd December, you maintain a balance of Rs. 3,000. Thus, the total balance for 27 days would be (27*3,000) = Rs. 81,000.
  • For the next 28 days, from 4th December to 31st December, you maintain a balance of Rs. 12,000. The total balance for 28 days would be (28*12,000) = Rs. 3,36,000.
  • At the end of the quarter on 31st December, the closing balance is Rs. 12,000 rupees.
  • At the end of the period, you maintained a balance of Rs. 9,43,000 for 92 days. Thus, your maintained an average daily balance of Rs. 10,250, as 943,000/92 = 10,250.
  • Even though your balance for 41 days was below 10,000 rupees, the quarterly average balance criteria was fulfilled.

 

Calculating the average account balance on a quarterly basis could be a very big advantage for you and your company. Theoretically speaking, if you were to maintain a balance of Rs. 9,00,000 for a single day within a quarterly period of 90 days, and nil balance for the rest of 89 days, you’d still meet the minimum balance requirement of your account. It is essential to open current account online, so that you can check your balance instantaneously and benefit from maintaining a quarterly average balance instead of a monthly average.

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