Maintaining a Minimum Monthly Average Balance ( MAB ) in your savings bank account is very important. If you fail to maintain a minimum average balance, Bank will charge a penalty from you. Banks have their fixed average monthly balance requirements according to the location of a customer’s account in urban, metro, semi-urban and rural areas. Monthly average balance and penalty varies from bank to bank.
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Banks also gives you option to open a zero balance account. you will have all the basic features in these accounts. also you don’t have to worry about maintaining MAB. Salary account and basic savings bank deposit account is a zero balance account.
Now a days you can apply for Pradhan Mantri Jan-Dhan Yojana (PMJDY). PMJDY accounts have “No minimum balance” requirement. PMJDY was launched in August 2014 as a step towards overall financial inclusion. Its objective was to ensure that every individual/family should have at least one bank account. We are not going into details about PMJDY in this article. Its a topic of discussion for another article. Here Let’s find out how MAB is calculated.
How is Monthly Average Balance ( MAB ) calculated?
Monthly Average Balance (MAB) is calculated by dividing the sum of the closing-day balances in a given month with the number of days in a particular month. MAB varies from bank to bank and branch to branch, It means metros, urban, semi-urban and rural branches have different MAB. and usually ranges from Rs 1000 to Rs 10000 for a regular saving account.
Add each day’s end-of-the-day balance and divide it by the number of days in that month. Simple is that.
Let’s learn this with an example.
Let’s assume MAB requirement of a bank is Rs 1000. and assume this month has 30 days. It means sum of each day’s end-of-the-day balance divide by 30 should be greater than 1000 which is MAB. If it is less than 1000 then you’ll have to pay the penalty.
- On first 5 days of the month we have Rs. 500 in our bank account. So every day for 5 days our closing balance was 500.
- On 6th day we deposited Rs. 700 in our account. and amount was 1200 for next 5 days.
- On day 11 we again deposited Rs. 300. and our amount become 1500. and every day closing bank balance was 1500 for 11 days.
- On day 22 we withdraw Rs. 1500 from account. and remaining balance was zero for next two days.
- We deposited Rs 2000. on day 24 and Rs 200 on day 27.
of Days (A)
|Amount at the
end of the day ( B)
|Total Amount ( A×B)|
|Day 6 – 10||5||1200||6000|
|Day 11 – 21||11||1500||16500|
|Day 24 – 26||3||2000||6000|
|Day 27 – 30||4||2200||8800|
|= 30 Days||= 39800|
Few Things to remember –
- Different banks have different Minimum Monthly Average Balance requirements. varies from bank to bank and branch to branch, Means if your branch is in metro city your MAB will be different than branch in urban, semi-urban or rural area.
- For public sector banks the MAB requirement is lower as compared to private sector banks.
- You can maintain your MAB thoughtfully. for example if your MAB requirement is Rs 1,000. You can either maintain that closing balance every day or have Rs 30,000 on a single day. It means the same.
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