Everything You Need to Know About Average Monthly Balance

When India’s largest public sector lender State Bank of India announced on 1st April that the customers who won’t maintain the monthly average balance (MAB) will be fined, it caused quite an uproar all across the nation. However, the concept of MAB is not quite new. HDFC Bank, ICICI Bank, etc. have been requiring their customers to maintain MAB since a long time.

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MAB: The Long and the Short

MAB is the amount you get by adding the end of day balances of all the days of a month and dividing the number by the no. of the days in the month. So:
MAB= Sum of all End of Day(EOD) closing balances/ No. of days in the month
MAB is not to be confused with the minimum account balance, which is the minimum balance your savings account must have in order for you to avoid penalties.

Monthly Average Balance and Quarterly Average Balance

There are some banks that require you to maintain a certain Quarterly Average Balance, but what’s that?
If you understand how monthly average balance is calculated, then you can easily calculate your quarterly average balance as well. In this, instead of dividing the sum of all the EOD closing balances during a month with the number of days in the month, you have to divide the EOD closing balances during a quarter (i.e. three months) with the number of days in the quarter.
So, QAB= Sum of all End of Day(EOD) closing balances/ No. of days in the quarter

Penalties for MAB Non-Maintenance

The amount of fine for the non-maintenance of MAB varies from one bank to another. 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.
So, if you want to avoid unnecessary fines or penalties, then it’s really important that you learn about the MAB requirements in your bank accounts if there are any.