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People having their savings accounts in various banks have to maintain a certain sum of money in their bank accounts. When this account balance falls below the required threshold amount, the bank levies a penalty on the account holder for failing to meet the requirements. If you also find it difficult to maintain the required minimum balance in your savings account then what you are going to read further is of utmost importance to you.
While maintaining minimum balance in your savings account is one thing, protecting yourself from paying penalty on non-maintenance of your account’s minimum balance limitations is another important aspect that you must look into. First of all you need to understand that, banks charge you penalty on non-maintenance of monthly average balance and not on minimum balance. Thus, if you maintain the required MAB in your account, you won’t be charged by the bank. Let us discuss about monthly average balance in detail.
Monthly Average Balance (MAB)
Monthly Average Balance is the sum total of all end of the day closing balances in your account divided by the number of days in that month.
- In the calculation of monthly average balance, banks consider all holidays as well.
- The account balance considered in the calculation of MAB is the amount in the account at the end of the day.
- Average daily balance of the day has nothing to do with the MAB unless specified by the bank
- If you don’t maintain the minimum balance but maintain the MAB, you won’t be penalised.
Let us assume that an account holder needs to keep Rs 3000 MAB in his account.
For the month of November,
His Sum of closing balance at the EOD= Rs 3000 x 30 (days) = Rs 90,000
Thus, as per calculations, for a 30-day month, he needs to maintain a total of Rs 90,000 in his account at the EOD. In case he fails to maintain the amount in his account, he will be penalised. If he somehow manages to maintain this amount in his account, he won’t be charged for non-maintenance of MAB.
Tips to Manage Your Minimum Average Balance (MAB)
Here are situations in which he can save himself from paying any penalty:
- He maintains a balance above Rs 3000 every day. Thus, he will have a minimum of Rs 90,000 as MAB for the month.
- He maintains a balance of Rs 3000 every day except for a couple of days when his balance fell to Rs 1000.
- Here, his total EOD closing balance for the month would be Rs 86,000
- He is thus short of Rs 4000 from maintaining the MAB
- He can be penalised for non-maintenance of the required amount in the account
- He can deposit the required Rs 4000 on the last day of the month to complete his total MAB of Rs 90,000 and save himself from paying the fine.
- He does not maintain any balance in the account for the complete month and is on the verge of getting penalised.
- Even if he has not maintained the MAB requirement, he can prevent from being fined.
- He can deposit Rs 90,000 in his bank account on the last day of the month and complete his MAB prerequisite during the month to Rs 90,000
- Since his total EOD balance for the month is Rs 90,000 now, he won’t be fined by the bank.
Penalty on Non-maintenance of Minimum Balance
Not every bank charges the same penalty for non-maintenance of MAB. Here is a list of some popular banks and the penalty charged by them:
|Bank||MAB (Rs)||Penalty for Non-maintenance of MAB (Rs)*|
|Metro & Urban||3000||40 – 100|
|Semi-urban||2000||25 – 75|
|Rural||1000||20 – 50|
|Metro & Urban||10,000||100 + 5% of the shortfall in required MAB|
|Semi-urban||5000||100 + 5% of the shortfall in required MAB|
|Rural||2000||100 + 5% of the shortfall in required MAB|
|Gramin||1000||5% of the shortfall in required MAB|
|Rural||1000||From 25 to 250 as per location, category and deficit in QAB as per brackets in 100|
|Metropolitan, Semi-urban and urban||2000|
|Bank of Baroda|
|Rural / Semi-Urban||2000||350/- per quarter|
|Urban / Metro||10,000||625/- per quarter|
|Semi-urban||5000||100 – 250|
|Rural||2500||100 – 250|
|Metro/Urban||10000||150 – 600|
|Semi-urban||5000||150 – 300|
|Rural||2500||270 – 450|
Bank Accounts free from Minimum Balance
There are a number of bank accounts where MAB or minimum balance is not applicable. Though they may have different names for different banks, some of the most common bank accounts that do not have minimum balance requirements are:
- Pradhan Mantri Jan Dhan Yojana Accounts
- Salary Package Accounts
- Basic Savings Bank Deposit Accounts
- Kids/Minor Savings Account
- Pensioners Savings Bank Accounts
- Small Accounts
- No Frills Accounts
List of Bank Accounts Having No Minimum Balance Requirements
There are some other bank accounts as well for which you need not maintain any minimum balance in your account. Some of these accounts are:
- digiSavings Account by DBS
- Kotak 811 by Kotak Mahindra Bank
- IDFC Bank Zero Balance Account
- ICICI Bank Edge Savings Account
- FedBook Selfie Account by Federal Bank
- Aasaan Account by Standard Chartered Bank
Now that you know all about what amount you need to maintain in your savings account and how to manage in case you do not want to pay fee on non-maintenance of the minimum balance requirement, you can plan your finances and utilise your money to earn more and save yourself from paying any penalty.