Calculating Monthly Average Balance MAB of Saving Accounts

minimum balance requirements

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minimum monthly average

To know about HDFC bank minimum balance requirements for various savings account schemes, Click on the following link. You will find the names of different saving schemes on the screen. Click on “view details” at the end of each scheme and go to “what are the fees and charges of — account” section. When you own a bank account, whether savings or current, the bank requires you to maintain a certain amount in the account during a specific period of time. That is called ‘minimum balance’ or ‘average balance’. If the minimum balance is prescribed for a quarter it’s known as ‘Quarterly Average Balance and if it’s prescribed for a month it’s called Average Monthly Balance.

Rs 5000 and Rs 1000 is the “Monthly Average Balance” for urban and rural areas respectively. Way back in 2012, SBI had scrapped this requirement of Monthly Average Balance maintenance. At that time it aimed at increasing its customer base. Now on a crusade to bring down the operating costs, it has revived the requirement. The AMB requirement and calculation vary from bank to bank.

Here’s all about calculating Monthly Average Balance (MAB):

MAB is the average of all the closing-day balances in a given month. To calculate the MAB, you need to add each day’s end-of-the-day balance and divide it by the number of days in that month. The motivation behind the maintenance of Monthly Average Balance would be to avoid the penalties.

There is no cap on the fines that a bank can impose for failing to maintain the minimum balance. The board of directors of the bank must approve the fees. The fees can differ from bank to bank and from branch to branch too. Bank charges are generally levied on the basis of the average balance actually maintained in proportion to the average balance required. The bank charges are very high for not maintaining average balance so use this calculator and keep the balance maintained.

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HDFC – For urban, semi-urban, and rural branches of HDFC Bank, the minimum average balance requirements are Rs 10,000, Rs 5000, and Rs 2500, respectively. A penalty of between Rs. 600 and Rs. 150 is imposed on you by the bank if the balance falls below the required level. SBI Saving Account has no monthly average balance requirement. Likewise, you don’t need to maintain any minimum balance in case of a salary account. For example, HDFC Bank’s Regular Savings Account has a minimum average balance requirement of Rs 10,000, Rs 5000, and Rs 2500 for urban, semi-urban and rural branches. If the bank goes below the level required the bank charges you a penalty ranging from Rs 600 to Rs 150 depending on the amount of balance.

  • Now, with the help of the account statement given above, we will calculate the “Monthly Average Balance” of Mr S. You may find the step-by-step calculation in Table 2 provided below.
  • Account holders whose saving account balances fall short of the “Monthly Average Balance” would bear the brunt.
  • When you own a bank account, whether savings or current, the bank requires you to maintain a certain amount in the account during a specific period of time.
  • This is the average of the closing day balance in the account during a calendar month.

Let’s look at how the monthly average balance is calculated. Most of the banks required their customers to maintain minimum balances in their accounts. The balance is calculated as average of the balance standing in the account at end of the day.

Meaning of Monthly Average Balance?

The idle funds from your savings account (at a pre-specified threshold limit) are transferred automatically to a term Deposit. The funds move back in to the savings account in case of funds requirements. No one wants to pay a penalty for not keeping the average monthly requirement. Here are some of the ways that can help you to avoid paying penalties. This is how the average monthly balance will be calculated for the month of June. is an award winning personal finance platform.

You should how is average monthly balance calculated a minimum balance in your savings account at all times and keep track of your MAB. Also, keep an eye on your expenses to manage your finances efficiently. Women’s Savings Account – Designed specifically to cater to the needs of women, this account offers discounts on various banking products, cashback and other benefits on shopping/transactions. Since it’s a customized version of Regular account, it also has min balance requirement. The penalty for not keeping the required minimum balance is also dependent on how short you are in maintaining the average balance.

Monthly Average Balance or MAB = Sum of all the closing balance in a month / Number of days in that Month

Although minimum monthly average is commonly used, few banks need quarterly average balance. MAB is calculated by dividing the sum of the closing balance in your account of each day with the number of days in a particular month . Usually, the MAB requirement set by banks vary from metros to urban, semi-urban and rural branches and it ranges from Rs 1000 to Rs for a regular saving account. The customer’s average monthly balance for February 2023 is INR 10,553.57, which is above the minimum balance requirement of INR 10,000. Therefore, the customer will not be charged any penalty for not maintaining the minimum balance.

While the entire concept of average balance is rather simple, here are some ways in which you can optimise your monthly average balance maintenance and ensure a smooth ride with your bank. This is the least bank balance that you, as an account holder, need to have in your account each month to avoid being penalised by the bank. Quarterly Average Balance is the actual sum of all closing balances of every quarter divided by the number of the day in the quarter. Mr. Dubey has a savings bank account in a particular bank.

The funds that account holders deposit are used by banks for a variety of purposes. The bank makes sure that a sizable amount of cash is always on hand at the bank for use in a variety of investment avenues by urging account holders to maintain a minimum balance in their accounts. Multiply the closing balance with the number of days for which it was maintained the account. It gives you the weighted account balances which would be subject to calculation of average. Account holders whose saving account balances fall short of the “Monthly Average Balance” would bear the brunt.

Similarly, if you are an individual with a savings account, try this approach with your personal credit card. Zero-balance current account or savings account, you must maintain the minimum average balance stipulated by your bank in your account each month. HDFC Bank’s AMB requirement is INR 10,000 for customers in urban and metro areas. This means that customers must maintain a minimum balance of INR 10,000 in their account every month to avoid penalties.

Keep in mind that the number of days total, including weekends and holidays, is considered here. Maintaining minimum average balance in a savings account is important yet neglected by many. You must maintain the minimum balance in your account to avoid penalties. Weigh your options before you apply for a current or savings account.

A common misconception is that MAB is the minimum threshold the account balance can ever touch. For example, if the MAB is Rs 5,000, most account holders understand that Rs 5,000 must always remain in their account at all times. Each quarter consists of 3 months that is around 30 days each. Since there are 4 quarters in a year, the total number of days in a quarter 90.

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So, to calculate the Monthly Average Balance, all you have to do is add up all the closing day balances from different days of the month. Thereafter, you have to divide this total amount by the number of days in the month. A savings bank account is undoubtedly one of the easy ways to keep your hard-earned money secure and benefit from the interest it generates, as per the rate offered.

You can also use freely available Monthly Average Balance calculators online to compute how much money you should deposit in your account each month. MAB is calculated by taking the average of all closing-day balances in a month. You add each day’s end-of-the-day balance and divide it by the number of days in that particular month. You typically have to maintain the average monthly balances ranging from INR 1000 to INR 100,000. The MAB requirement depends on the bank and the type of account you choose to open. Since the monthly average balance requirement differs from bank to bank, the penalty charges are also different for each bank.

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A Savings account is a bank deposit account that offers interest on the balance kept in the account. It allows you to secure or withdraw money when the need arises. Banks now a days are offering different types of accounts to cater to the needs of various customer segments with specific benefits and offers. From senior citizens to kids, there is a proposition for everyone. 2) Usually the basic savings account or No frill accounts do not require a minimum balance.

When that happens, it impacts the credit score of the account holder, which further impacts the customer’s prospects of availing of loans in times of need. Most people are unable to grasp the fundamental mathematics underlying this MAB concept. They believe that to avoid penalties from banks against MAB, you must have the required amount in your bank each day. “Monthly Average Balance” is calculated by adding up all End of Day balances and dividing that amount by the number of days in the month. The formula below determines the average daily balances at the end of each day.

However, if you are not sure you can maintain it you can either keep Rs.45,500 for one entire month or Rs.15,500 for entire span of 3 months. Both the ways, you will be able to maintain the required QAB. What to learn from this is, that you can spread out the deficit amount over a few days to make up for it. However, due to the deficits created over days, you need to pour in more money to make up for it. The policy on penal charges to be so levied may be decided with the approval of Board of the bank.

It is calculated by adding up the daily balances of the account for a particular month and dividing it by the number of days in that month. The minimum average balance is calculated by adding up the closing balance in your account every day divided by the number of days in that month. So, if your balance was below the threshold limit for the most part of the month, even then you can avoid a penalty by maintaining a higher amount for the rest of the month. For those having multiple savings accounts and living on a thin budget, maintaining a monthly average balance can be an uphill task. Monthly average balance is the minimum amount you are required to maintain in your savings account every month. Most of us carry the impression that the monthly average balance is the average daily balance we must maintain.

It only takes a couple of minutes to get a zero balance up and running. However, you may need to visit the bank branch to get your KYC done. There was a debit message from her bank account that she rarely used.

For instance, if your MAB is below 75% of the required amount in SBI, then you will be charged Rs. 100 plus service tax. Similarly, if you have a savings account in an urban branch of HDFC bank, then the non-maintenance of MAB will attract a fine of Rs. 150 plus taxes as applicable. For a no frill account and basic savings bank deposit , banks usually do not require any MAB. Therefore, even if there is no money in such an account, there are no charges levied. Failure to maintain the minimum balance may result in penalties.

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