Most bank accounts have a zero balance, but paying attention to this is important. Your bank account needs to maintain a monthly average balance (MAB), which is crucial to avoid various issues.
The Monthly Average Balance (MAB) is the average amount you keep in your savings and current accounts during a calendar month. It’s calculated based on the average of your daily closing balances throughout the month.
At the end of every month, the bank calculates whether you have met the required MAB. If not, you may face fines. Maintaining the MAB will benefit you in your financial journey.
Importance for Banks: Banks depend on your MAB to manage their funds efficiently. The bank uses the money you keep in your account to extend credit to borrowers and invest in financial instruments like mutual funds and securities.
MAB not only helps maintain banking stability but also contributes to financial stability by indirectly protecting deposits and investments.
Significance for Loan Applications: Your MAB reflects your financial stability and responsibility. Consistently maintaining the required balance in the account demonstrates your ability to manage finances.
This is advantageous when applying for loans or credit cards. Banks often consider your account’s MAB to gauge your financial discipline.
Benefits of Maintaining MAB: Keeping the MAB comes with additional banking privileges, and it is also considered when applying for loans.
These benefits may include preferential interest rates and discounts on various financial products. Banks use MAB as a benchmark to extend benefits to loyal and responsible customers.
Penalty Charges: Failing to maintain an average monthly balance in your account may result in penalty charges. The amount varies depending on the bank and account type. If you fail to keep the MAB, a monthly maintenance fee may sometimes be charged. In certain situations, account closure may occur.
Ensure your account balance is above the MAB to avoid these unnecessary charges. Maintaining a good credit score is essential for obtaining loans and credit cards, as it reflects positively on your financial track record.
Understanding Average Monthly Balance: The average monthly balance refers to the average closing balance maintained in a bank account over a period of one month.
It is calculated by adding the ending balance for each day of the month and then dividing the total by the number of days in the month. The average monthly balance requirement is Rs. 10,000. In your account every day, Rs. 10,000 is not necessarily the minimum.