Do you understand what is the meaning of Minimum Monthly Average Balance in your saving account? When you say “Monthly Average Balance of your saving bank account is Rs.10,000”, what does it mean exactly?
A lot of people feel that their balance in saving bank account should not go below Rs.10,000 on any given day, otherwise, there will be penalty charges and they make sure that they have a buffer of Rs.10,000 in their saving bank account all the time.
This means that their accounts should always have that much surplus. However, the way the monthly average balance is calculated is different and very simple.
Meaning of Monthly Average Balance?
It simply means the average of all the closing day balance in a given quarter. So given a quarter, add up all the closing day balance and then divide it by the number of days in the quarter. If you have to put it as formula it would be
MAB = (Total of all the EOD closing balance)/(number of days in the quarter)
Let me show you an example. Let us say the quarter we are talking about is Apr-June. Now your balance at the start of the quarter (Apr 1) is Rs.20,000. You withdraw Rs.15,000 on 15th Apr and then Deposit Rs.8,000 on 12th June. What will be the Monthly average balance for the Apr – June Quarter?
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Learnings & Tips
- Keeping Rs.10,000 in a bank account for 15 days is same as keeping 5000 for full 1 month (10k * 15 days = 5k * 30 days)
PSU Banks vs Private Banks
A lot of PSU banks like SBI Bank, Bank of India, Allahabad bank generally have a lower Monthly Average Balance to be maintained in a savings bank account, its average limit is up to Rs.5000 in most of the banks and non-maintenance Charges are very low around Rs.40-50 only.
However Private banks like ICICI Banks, HDFC Bank, Axis Bank etc have Monthly balances as high as Rs.10,000 and high charges as a penalty for not maintaining it, It some times can be as high as Rs.750.
Did you knew how the minimum average balance is calculated ? Now will this information impact your banking in any way ? Will you keep less money in your bank account because you now understand that Monthly average balance is calculated in a different way than you thought?