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Here's how to calculate minimum balance requirement in a savings account

The country’s largest lender, State Bank of India SBI) has revised charges for non-maintenance of Average Monthly Balance (AMB) in savings accounts effective from April 01, 2018.

The charges for non-maintenance of AMB for customers in Metro and Urban centres have been reduced from a maximum of Rs 50 per month to Rs 15 per month. Similarly for Semi-Urban and Rural centres, the charges have been reduced from Rs 40 every month to Rs 12 and Rs 10 GST charges will be applicable over and above the rates specified above.

Click here for SBI's criterion for MAB in savings accounts and charges for non-maintenance of AMB with effect from April 01, 2018.

At present, many banks insist on maintenance of AMB. As a savings account holder, one needs to keep an eye on the average balance limits set by the bank. Some banks have a low limit of Rs 1,000 while some may ask you to keep it at Rs 5,000.

As the minimum balance requirement has to be met to avoid penalties, one should know how it is calculated to ensure that this requirement is met while optimising the amount of funds kept in a savings account.

Average Monthly Balance: Calculation

Here's how to calculate the average monthly balance for bank savings accounts:

Say, a bank asks that you maintain Rs 5,000 as average monthly balance.

This is how AMB will be calculated in August.

On 1st August, the balance in the account is Rs 4,000
On 12th August, withdrawal of Rs 3,000 take place
On 18th August, deposit of Rs 9,000 takes place

From 1st August to 12th August, i.e., 11 days, total balance will be Rs (4000*11) = Rs 44,000

From 12th August to 18th August, total balance will be Rs (1000*6) = Rs 6,000

From 18th August to 31st August, total balance will be Rs (10000*13) = Rs 1.3 lakh

So, total balance comes to Rs 1.8 lakh and the average for 31 days will be Rs 5,806, which is above the required limit and no penalty will be levied. The number of days is calculated on the basis of the day's closing balance.

An account without MAB
If you are finding it difficult to maintain the MAB, you can consider opening a basic savings bank deposit account (BSBDA).

All banks are mandated by the Reserve Bank of India (RBI) to offer such a facility to those looking to open a bank account. You can use the BSBDA account as a secondary account to manage your regular savings bank account more efficiently. You don't have to maintain a minimum average monthly balance and no minimum amount is required for opening the account. The interest rate will be the same as that on the regular savings account. RBI rules do not put restrictions on deposits or withdrawals from this type of account, neither does it have any transaction limits.

Although the BSBDA is a zero-balance savings account, it comes with restrictions as far as number of transactions is concerned. Therefore, before you go ahead and get a new BSBDA, click here to know more about it.

Certain categories of individuals such as students or senior citizens drawing pension or those who have just started their professional careers can find it hard to maintain minimum balances. Also, many people maintain 3-5 bank accounts and thus have to maintain a minimum balance in each one of them. Therefore, one may consider keeping one primary account with unlimited transactions and in addition a BSBDA with limited transactions.

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