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How can you calculate minimum balance requirements for savings accounts?


How can you calculate minimum balance requirements for savings accounts?

SBI (State Bank of India) is considering a reworking of the MAB requirements post its introduction of MAB or minimum average balance that has to be maintained in savings accounts. The MAB had previously been scaled up to Rs. 5, 000 in June, 2017 but post protests from the general public, this was lowered to Rs. 3, 000 in metro cities and Rs. 1, 000 in rural zones along with Rs. 2, 000 in semi-urban zones. There is a penalty payable in case the MAB is not maintained.

For example, if the minimum average balance stands at Rs. 3, 000 for a metro city and the deficit is in excess of 75% or the MAB stands at lower than Rs. 750, the fine imposed will be Rs. 50 + GST. Many banks emphasize on MAB maintenance at present. Savings account customers should watch out for the limits that are set by their banks. Some banks have a lower limit of Rs. 1, 000 while some may insist on at least Rs. 5, 000.

Here is a sample calculation for the MAB that one should keep in mind. Suppose the account balance is Rs. 4, 000 on the 1st of the month and thereafter, on the 10th, there is a withdrawal of Rs. 3, 000 and there is a further deposit of Rs. 9, 000 on the 15th. The total balance will be Rs. 4, 000 multiplied by the total number of days from the 1st of August to the 10th, i.e. 9 days, i.e. 4, 000*9 which is Rs. 36, 000/-

The total balance between the 10th and 15th is Rs. 1, 000*6 = Rs. 6, 000/- and total balance between the 15th and 31st of the month will be Rs. 10,000*13, i.e. Rs. 1, 30, 000/. The total balance is hence Rs. 1, 72, 000/- and the average if you consider 31 days stands at Rs. 5, 548 which is well above the necessary limit and there will be no penalties imposed.

In case maintaining the minimum average balance is hard, you can always open a basic savings bank deposit account or BSBDA which all banks have to offer to customers if they desire so, as per the guidelines of the Reserve Bank of India (RBI).

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