Know How to Calculate Minimum Balance Requirement for Savings Account

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Banks have reintroduced the concept of ’Minimum Account Balance’ (MAB). Ensuring this amount is maintained is important to avoid paying penalties.

Earlier several banks often required you to maintain higher minimum balance in your account. However, financial institutions now have reduced this amount and often have different requirements for metro and rural areas.

It is crucial you maintain this balance in your account to ensure you do not pay any penalty. Some banks may need a lower MAB while others may require a higher MAB. You need to be aware of the amount to ensure you are not penalized for non-maintenance of the minimum balance.

Because non-maintenance entails a penalty, it is important you need to know how it is calculated. Here is how the minimum account balance is calculated.

Calculation of MAB

Assume that you live in a metro city and your bank requires you to maintain INR 5,000 as the minimum balance in the savings account. Here is the calculation of the monthly MAB for the month of January 2018.

The balance for the first 11 days (January 1 to January 12) is 8,000*11= INR 88,000

The balance between January 12 and January 18 is 2,000*6 = INR 12,000

The balance for the period from (January 19 – January 31) is 20,000*12 = INR 2.4 lakh

The total is INR 3.4 lakh (88,000+12,000+240,000)

The average for the 31 days during the month of January is INR 10,968 (340,000/31)

Because the average monthly balance is more than the required amount of INR 5,000, you will not be penalized for non-maintenance. You need to remember that the number of days is based on the day’s closing balance.

No minimum balance accounts

You may not be able to maintain the minimum balance requirement. In such instances, it is advisable that you open an account that does not have any MAB requirement. According to the Reserve Bank of India (RBI) norms, every bank must offer such accounts for individuals who want to avail of one.

You may choose a Basic Savings Bank Deposit Account (BSBDA).These accounts do not have any MAB requirement. Moreover, a BSBDA has no minimum amount requirement aspect at the time of opening the account. You may use it as the secondary account to maintain your regular saving account in an efficient way.

The rate of interest on the BSBDA is the same as the regular account. Additionally, there are no limitations on withdrawals and deposits to the BSBDA. RBI also does not levy any transaction limits on such accounts. However, there is some limitation on the number of transactions. Therefore, you need to know the terms and conditions before you opt for a BSBDA.

You may hold more than one account and meeting the MAB requirement on all may be difficult. Therefore, you must consider one primary account and an additional BSBDA for limited transactions.

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