A savings account is a basic type of bank account that allows you to deposit your money, keep it safe, and carry out transactions with ease. Moreover, you can earn interest on the balance in your savings account. With leading banks, you can open savings account online from the comfort of your home.
Most banks would require you to maintain a Monthly Average Balance (MAB) in your savings account. Failing to meet the minimum balance criteria may attract penalty charges. Thus, it’s important to understand what is Monthly Average Balance (MAB), how is it calculated, and how you can maintain the same without any difficulty.
What is Monthly Average Balance and how is it calculated?
Monthly Average Balance (MAB) is the minimum balance that you must maintain in your savings account on a monthly average basis. For instance, if the MAB is Rs. 10,000, you don’t necessarily need to maintain Rs. 10,000 balance every single day; however, the monthly average should be Rs. 10,000 or more to avoid non-maintenance charges.
Here’s an example of the same:
| Date | Particulars | Withdrawal | Deposit | Balance (A) | Days (B) | Sum of funds (A X B) in Rs. |
| 1st May 2021 | Opening Balance | Rs. 10,000 | 11 | 1,10,000 | ||
| 12th May 2021 | Cash Deposit | Rs. 2000 | Rs. 12,000 | 8 | 96,000 | |
| 20th May 2021 | Cash withdrawal | Rs. 5000 | Rs. 7,000 | 5 | 35,000 | |
| 25th May 2021 | Cheque Deposit | Rs. 8000 | Rs. 15,000 | 7 | 1,05,000 | |
| 31st May 2021 | Closing Balance | Rs. 15,000 | ||||
| SUM | 31 | 3,46,000 |
- Total number of days: 31
- Sum of the funds for this duration: Rs. 3,46,000
- The Monthly Average Balance (MAB) for 31 days is 3,46,000/31 = Rs. 11,161
Thus, the MAB is maintained and the accountholder won’t have to bear any penalty charges. There are certain tips and tricks that can help you maintain MAB easily.
Easy ways to maintain MAB
- Don’t open multiple accounts
You must note that the minimum balance criteria may differ from one bank to another. If you have multiple accounts, keeping a track of the MAB requirement of different banks can become tedious. This can lead to the non-maintenance of MAB. Moreover, you would be blocking a lot of cash just to maintain the average balance requirements in those accounts.
- Make a lumpsum deposit
As mentioned earlier, you don’t necessarily need to maintain the minimum balance on a daily basis to meet the MAB requirement. You can maintain MAB tactfully by making a lumpsum deposit. For instance, if the Monthly Average Balance requirement is Rs. 10,000, you can either maintain a closing balance of Rs. 10,000 every day or have Rs. 1,50,000 on a single day in a couple of weeks. In both cases, your MAB requirement will be fulfilled.
- Withdraw your funds smartly
You must withdraw your funds only when necessary, or you can stick to using a credit card to make payments. By doing so, you can ensure that your savings account has a sufficient balance to meet the MAB requirement.
If you wish to skip the hassles of maintaining minimum balance altogether, you can opt for a Zero Balance Savings Account. With a Zero Balance Account, you can earn the prevailing savings account interest rate as well as utilise your funds flexibly without worrying about the MAB requirement.