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There is a huge cry over the recent SBI Bank’s move that from 1st April 2017 it will penalizing those savings account holders who not maintain the Monthly Average balance or MAB. But do you know how Monthly Average Balance or MAB is calculated?

Let us take an example of SBI Bank’s new Monthly Average Balance or MAB rates for the savings account.

Monthly Average Balance or MAB of SBI Bank’s Savings Account

Effective from 1st April 2017, SBI Bank will charge a penalty on all those savings accounts who not manage Monthly Average Balance or MAB. The applicable Monthly Average Balance or MAB are as below.

SBI Charges for Non-Maintenance of Monthly Average Balance or MAB 2017

You noticed that maintenance of balance is based on the place you live in.

What is Monthly Average Balance or MAB?

Monthly Average Balance or MAB is defined as the sum of all the end of the day closing balance of your bank’s savings account divided by the number of days in that particular month. Same can be explained with below formula.

Monthly Average Balance or MAB=Sum of all the EOD closing balance / Number of days in that Month

I know many of us misunderstood it differently. If the non-maintenance of Monthly Average Balance or MAB means many of us feel that we must maintain that much amount minimum throughout the month. However, it is not the case like that.

Note that for this calculation, holidays are also considered. Hence, you have to consider all working days and as well as holidays of the month. The second point to be remembered is that the balance of each day is considered as END OF THE DAY balance than the average balance of the day.

Let me give you an example from below image. Let us Mr.X holding savings account and below are his transactions for the month of February 2017.

How Monthly Average Balance or MAB is calculated

Now you noticed from above calculation that if your bank asks you to manage the average balance of Rs.6,393 (just took an example), then it does not mean that you must maintain Rs.6,393 from 1st day to last day of monthly always. However, if you manage the monthly average of Rs.6,393, then also it is fine.

Hence, it is monthly average that matters than the daily managing of Rs.6,393. Hope you got my point.

Few tricks to manage the Monthly Average Balance or MAB-

Let us say the average balance you have to manage is Rs.5,000 and the days in a month are 31 days.

# Keeping Rs.5,000 a day throughout a month is same as keeping Rs.55,000 for 3 days.

You no need to manage Rs.5,000 from the 1st day to 31st day of the month. Instead, even if you manage Rs.55,000 for 3 days also, then your average Rs.5,000 average managing of the month can be achieved. How?

Rs.55,000*3=Rs.1,65,000

Number of days in a month are 31 days. So average balance for the month=Rs.1,65,000/31=Rs.5,302. This Rs.5,302 is well above the bank mandaged Rs.5,000 average monthly limit.

Hence, if your bank suggests you to manage the monthly average of Rs.5,000, then DON”T PANIC. Instead, do some simple calculation. Consider the highest days in any month i.e. 31 days. multiply 31 days to Rs.5,000. The result will be Rs.1,55,000.

This Rs.1,55,000 is the total of your end of day balance for the whole 31 days. You can achieve this either in one day or in 31 days it does not matter.

If your end of the day balance is Rs.1,55,000 or above in a single day and later on it is ZERO balance, then also you no need to worry. Because you managed the AVERAGE balance for the month.

# Try to open the account in Urban, Non-Urban or in Rural areas.

Once the account opened, then request for internet banking facility. Once this is activated, then you no need to visit the bank branch so often.

You can handle all your banking transactions online. By this way, you can reduce your risk of managing the higher average balance in your account.

# Go for Public Sector Banks than Private Banks

Usually, public sector banks offer you to manage less balance than the private banks. I know that at the end it is comfort and service with bank that matters. However, if you are scary of penalty charges for no-maintenance of average balance, then I suggest you to go for public sector banks than private banks.

# Use Auto-Sweep Option

By using Auto-Sweep Option, you can track your average balance. In Auto Sweep option, you will specify the limit say like Rs.10,000. Any balance over and above Rs.10,000 you deposited into the savings account will be turned as FD. In this way, you no need to do the calculation of managing the average balance. Also, you earn something from your FD.

# Check the date range your bank consider

Few banks may follow the regular starting day of the month to end of the day of the month for calculation of average balance. However, it MAY differ with some banks and they may consider say like 5th of the month to 4th of next month.

Hence, clarify with your bank to avoid unnecessary confusion.

# The amount you keep to manage average balance will also earn some interest with some tax benefit

The cash you keep it in the savings account may be idle. But it will earn something than totally NIL. Usually, nowadays many banks offer you around 4% return on this cash. It is calculated as below.

Monthly Interest = Daily Balance * (Number of days) * Interest / (Days in the year)

Let us say the daily balance is Rs. 50,000 and the interest on the savings account is 4% per year the calculation will work out as below.

Monthly Interest = Rs.50,000 * 30 * (4/100) / 365 = Rs. 164.

The interest that you earn from the savings account is considered as “Income from Other Sources” However, you can claim deduction of up to Rs.10,000 on such interest earned under IT Sec.80TTA per year. This deduction is available only to individual and HUF. In Sec.80TTA of the Income tax act, interest up to Rs.10,000 earned from all savings bank account is exempt from tax. This is applicable for savings bank account, post office or co-operative banks.

Also, there is no TDS on the interest you earned. Whatever the interest over and above Rs.10,000 will be taxed as per your applicable tax rate.

What is the difference between Monthly Average Balance (MAB) and Quarterly Average Balance (QAB)?

I already explained you about monthly average balance or MAB. Few banks may insist you for Quarterly Average Balance or QAB.

In the case of Quarterly Average Balance, instead of a month (in the case of Monthly Average Balance or MAB), the calculation is for a quarter or for 3 months. It is calculated as below.

QAB = (Total of all the EOD closing balance)/(number of days in quarter)

Rest of all logic and calculation is same.

Which is beneficial Monthly Average Balance (MAB) or Quarterly Average Balance (QAB)?

Let us say the minimum balance requirement for monthly average balance is Rs.5,000. Then the total daily balance amount must be Rs.1,50,000 (if we consider the days in a month as 30). Therefore, if you maintain NIL for whole month and on last day if you deposited Rs.1,50,000, then you will be considered maintained the average balance.

Let us say the minimum balance requirement for quarterly average balance is Rs.5,000. Then the total daily balance amount must be Rs.4,50,000 (if we consider the days in a quarter as 90). Therefore you have to deposit even if you left the account with NIL balance and on last day of a quarter you deposited Rs.4,50,000, then also the account is considered as balance is maintained.

The logic why banks moved from QAB to MAB is because of this. They need your idle cash to run their shows. The probability of customers managing a certain minimum balance consistently is higher in the case of MAB than QAB.

In case of QAB, the probability is high that we (customers) may keep the account with NIL balance and at the end we may fill the gap with lump deposit for few days. However, in case of MAB, we have to do this activity on monthly basis. Hence, banks find it easy and adopted to MAB than QAB.

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About Basavaraj Tonagatti

Basavaraj Tonagatti is the man behind this blog. He is SEBI Registered Investment Adviser who is practicing Fee-Only Financial Planning Process and also an Independent Certified Financial Planner (CFP), engaged in blogging since 7 years. BasuNivesh blog is ranked as one among India's Top 10 Personal Finance Blog. He is not associated with any Financial product/service provider. The purpose of this blog is to "Spread personal finance awareness and make them to take informed financial decisions." Please note that the views given in this Blog/Comments Section/Forum are clarifications meant for reference and guidance of the readers to explore further on the topics/queries raised and take informed decisions. These should not be construed as investment advice or legal opinion."

Reader Interactions

Comments

  2. Samruddhi kale

    Your AC XXXXX346299 Debited INR 530.68 on 19/09/18 -MAB SB Debit . Avl Bal INR 2,209.32…..Sir don’t know meaning of that massage why sbi deducted 530 from my a/c

    Reply

  4. TABREZ

    MAB YEAR WISE YA MONTH WISE PAY KARNA HOTA HAI.
    JAB V PAYMENT AATA HAI TO SMS CHARGE AND MAB KA RS.100 BALANCE DEDUCT HO JATA HAI.
    WHY IS HAPPENED SUCH TYPE ?

    Reply

  5. Vinay

    Hi Basavaraj,
    Your blog is very helpful n informative.
    Need some info on basic savings accounts which can be opened by using Aadhar OTP method like kotaks 811, axis ASAP account. R these accounts valid only for 1 year? N is it possible to open multiple accounts of this type in diff banks? In ur opinion which banks basic savings acc is gud ?

    Thanks in advance!!!

    Reply

    • Basavaraj Tonagatti

      Vinay-If your transactions are limited, then you can go for Basic Savings Accounts. The account is not valid for a year. Why you need multiple accounts (even though you can open it)? Choose the bank which is comfortable and nearer to you.

      Reply

  6. Alex Basu

    Dear Sir, at the outset I would like to Thank you for your detailed information. But the question that comes to my mind is what is the logic behind the MAB. Why do the Banks need to have MAB. There are earning through loans and advances. They charge us for SMS,ATM , cheques issues, Account transfer. Then why do they need MAB penalty charges. I am not complaining about this. But if possible could you please explain what’s their loss if they don’t charge MAB,

    Reply

  8. jai

    Hi,

    I am not using my SBI account for more than 1 year. Approximately how much amount will I get penalised. I am living in Bangalore

    Reply

  10. Shivam

    They have charged me twice 1. On 18 Aug With rs177 and other also in the same month that is on 20 Aug with RS 177. What that could be as I have gone through ur article it was very easy to understand but still I dint understand why they charged twice?
    Btw Thank you for taking ur time and giving us the information.

    Reply

  13. Nagu hari

    Hi im Nag hari.
    bcz of this mab..i couldnt maintain a proper min balance because of my family condition…so with this new process its like poor guy begin not rich and charging penalty.what will the poor people do..they earn 500rs which they save there money…some times need to with draw…bank taking it as fine its not fare….

    thank you

    Reply

  14. Adnan hussain

    Sir basically want to know that is there any fixed date on which MAB deduct or it can be deducted on any any in a particular month .
    Following is my statement and want to Know how can i get back all my deducted amount charged differently :-
    Particular Amount
    on 1 April 2017 258
    16.4.17 158
    26.4.17 58
    15.6.17 44
    25.6.17 45
    * There is a cash withdrawal between these dates .

    Then my balance remained at rs 45 till 18 August 2017 i.e. my balance has not been deducted between 25.6.17-18.8.17 for any charges (let say SMS, MAB etc…)

    then eventually on 18.8.17 the amount of 45 has been deducted for MAB charges
    then i deposited rs 1500 on 26.8.2017 in my A/C ( in my opinion when they didn’t deduct any amount till 18 then they should not deduct the same after i deposited 1500 for the period already passed)

    but on 26.8.2017 my A/c has been debited by rs 237 for MAB charges
    on 31.8.2017 my A/c has again been debited by rs 94 for MAB charges

    So i want to know that how this calculation is taking place . My MBA should be rs 3000 Please Explain

    and also want to know:-
    1 What if i have also been charged for Insufficient Balance ATM Decline Charges (when some time i have balance in my account but ATM does not have Such Denomination )
    2 What if i have also been charged for SMS on Quarterly Basis (when I am not getting any message for amount Withdrawal)
    Please Help

    For any Further Questions to solve my Queries you can Inbox me on the Given Link:-

    Reply

      • Adnan hussain

        Sir i am unable to attach my account statement here because no option available but i have written it step wise transaction and i am also shocked for such random amount deduction by SBI so know what you recommend me to do ?

        is they allowed to deduct such amount in around a week or they also have some restriction on imposing such deduction ?

        Do they are allowed to deduct MAB for previous months in this month ?

        basically sir agr iss trh deduct krna tha toh 1st month main hi jb bal kum hua tha toh 45 ko toh deduct krte taki main dalwa deta bal why they waited ki pahle deposit krwau then woh ek saath itne kaate.

        mera account zero balance account tha toh meko dhyan noi rha iss MAB ka toh ese kese kr skte hai .

        and sir mene 2 orqueries daali hai ie
        1- insufficient balance decline by ATM charges of around 23 in one time decline jb ki ATM main woh notes Available noi thy ek baar nd ek baar scchi main balance kumm tha toh uska kya
        2- SMS charges jo deduct hote hai jbki mere pass sms alert hi noi aate sirf amount Deposit ka aata hai withdrawal ka noii
        plz Reply

        Reply

          • Adnan hussain

            i already asked but they said that it is done by software and they are not aware of the calculation and all.

            when i asked them that why didn’t they intimate before such deduction then they said that the MAB levied by SBI was given in news papers etc and hence they are not responsible even if i don’t know about it . Also they have mentioned that for such levy of MAB the bank staff had strike for a day for which their Salary has also been deducted .

            So at the end they Denied to help me or resolve my concern.

            Reply

  15. Sumit Kumar Prajapati

    Sir, mine is an State Bank Savings account and am an unemployed. . My account balance will be mostly below 100 becoz as am from poor family. . I receive 4000 from my home for my expenditures. . Once I withdraw it every month being. . Last month I got three times charged as text mentioning “Your AC **** debited INR 59.00 on 19/08/2017 MAB SB Debit. . Plz download Buddy.”
    Whats the solution for it and why download buddy. . Do let me know clearly Sir Plz

    Reply

    • V.K.Malviya

      I found from scrutiny of my SBI s/a that my Auto sweep option(Rs. 10000/-) made me more velnerable to MAB every month because whenever the balance suppose 12000/- Rs. 10000/- goes in FD and meager 2000/- remains.Normally in s/a small amounts is credited or withdrawn.So is the situation in my s/a, debited MAB every month since 4/2017.

      Reply

  18. Nilesh

    Sir, mine is an State Bank Savings account and am an unemployed. . My account balance will be mostly below 100 becoz as am from poor family. . I receive 4000 from my home for my expenditures. . Once I withdraw it every month being. . Last month I got three times charged as text mentioning “Your AC **** debited INR 59.00 on 19/08/2017 MAB SB Debit. . Plz download Buddy.”
    Whats the solution for it and why download buddy. . Do let me know clearly Sir Plz

    Reply

  20. Naren

    Very clearly explained. Thanks for taking time to write this article.

    I assumed that bank would consider FD as well for MAB until I received email recently from bank to keep necessary balance and they did charge of Rs.34/- as well for the same.

    Reply

  22. Sivakumar

    How can unemployment and people earning <6lacs per Ann people's to maintain MAB/QAB is it possible to them tell me …

    Reply

  23. Puja

    How silly calculation is it.. If I multiply a balance with the days and then divide the result again with the same no of days it is very obvious the balance remains the same.. So why to calculate at all.. The mab needs to be 5000 thaz it .. Is it so.?

    Reply

      • S Madhavan

        Firstly, I appreciate Mr. asavaraj Gonagatti for his post.

        @Puja : Mr. Basavaraj Tonagatti explained very clearly.

        Let me put in simple lines
        Suppose the MAB is Rs.1000 for a month of 31 days, it can be achieved by
        1. Keeping a balance more than 999 for 31 days…. (ave comes out as you mentioned) OR
        2. Just keep 2000 for 16 days (remaining 15 days balance be Rs.0)
        3. Just keep 3000 for 11 days (remaining 20 days balance be Rs.0
        ….
        …….
        31) Just keep Rs.31000 for any single day of the month, remaining 30 days balance be Rs.0).

        Hope you understood at least by now.

        Reply

  24. Mohan

    Hey Basavaraj,

    Well let me appreciate for the article you have made out of your daily schedule.

    The article you have made is not clearly directed to every individual’s need. Because few of them would not understand how it is calculated(MAB).

    So my friends. MAB is calculated as the example illustrated above. Okay let me come to those who have asked what if they deposit at the month begining with 5000. Well the calculation is simple you need not go with the example given above. There is no requirement to deposit or withdraw a few times in a month to maintain the average balance.

    Example: Suppose if you deposit 5000 on 1st of Jan and don’t do anything until 31st Jan. Now the logic comes. Jan has 31 days. So 5000×31=1,55,000/31=5000 . So you got the same MAB of 5000. And again Feb opening balance is 5000 and you don’t do any transaction till 28th Feb . So 5000*28=1,40,000/28=5000 . So this arrive at the required MAB . So don’t worry until you maintain 5000 as minimum balance each month. Without any transaction.

    If you do transaction then calculate the days and multiply the amounts with dates and then divide it by days in that month.

    Hope this helped.

    Regards,
    Mohan

    Reply

  27. Rahul

    Maintaining ?5000 in account daily should be fine as avg would amount to ?5000. Don’t know where you studied about average.
    First do proper homework then post articles on internet.

    Reply

  28. akanksha sabharwal

    sir, i tried understanding it but being a young science student i didn’t understand it . so could you tell me if i am write or not ? well if i keep 20k in account and use only till 10 k . and leave the 10 k untouched, will it suffice the MAB of 10k ? itll be a great help if you could reply in simple terms. thanks alot

    Reply

  29. Ashish Shah

    Dear Sir,

    When there is an overdraft account against FDR, then how is the MAB calculated? Say for example I have FDR of 1,00,000 & the bank gives me an overdraft facility of 80% ie Rs. 80,000 & I use 20,000 for the full month then what would be my Monthly Average Balance? Would it be 60,000 as I have an available balance to use of Rs. 80,000 & I have used only 20,000.

    Reply

  31. rohit

    If i deposit Rs 6000 in my SBI savings account and don’t do any transactions will it be fine? I live in metro city.

    Reply

  33. Sham

    Hi,
    I have used HDFC AMB calculator and the following entries resulted that my current AMB for the whole April month (30days) is 9728. How is that possible. Are they using a different calculating method
    Days Amount
    day 1 Rs.3823
    day 2 Rs.3823
    day 3 Rs.3823
    day 5 Rs.13882
    day 4 Rs.3823
    day 6 Rs.13882
    day 7 Rs.13882
    day 8 Rs.13882
    day 9 Rs.13882
    day 10 Rs.3647
    day 11 Rs.3647
    day 12 Rs.3647
    day 13 Rs.3647
    day 14 Rs.6447
    day 15 Rs.6435
    day 16 Rs.6435
    day 17 Rs.6435

    Reply

  37. sapna devi

    Hi sir
    My name is sapna and i have a/c in sbi and i have recurring deposit account then also i need to maintain minimum amount or no need mab .
    Please advice me .

    Reply

  40. ravindra

    Hi Basu,
    My retired teacher is living with wife and a divorcee daughter and a grand daughter. They have their own house to stay but totally depending on the pension for day to day living. The family always looking for the pension day eagerly and also heavy rush is in the bank for first week of the month. A mere 15-16k pensioners can afford to maintain this balance?
    Any advice to this family……………..??!!
    Thanks

    Reply

  41. B.D.KUKRETI

    Sir,

    Your comments is o.k. wherein you have explained and informed in advance.How ever we are under non metro city then it is applicable to us for MAB in SBI. kINDLY CONFIRM.

    Reply

  42. Ramesh

    Mr. Basavaraj – MAB concept well explained ! However, I feel it’s unfair and unethical for Banks like SBI to burden regular S.B. A/c holders, particularly in Metros and urban areas, who now have to maintain an MAB of Rs. 5000 instead of the usual Rs. 1000. This when Banks are supposedly slush with funds post demonetization. SBI Chairperson recently stated publicly that Banks like hers need funds to maintain JDY A/cs. If that’s so, shouldn’t the Govt of India bear the expenses for maintaining JDY A/cs and compensate Banks ? Is there any authority where we can protest this new MAB rule ?

    Reply

      • Ramesh

        Thanks Mr. Basavaraj. But, I guess only mass social pressure will prevent the Banks from enhancing MABs to help them “maintain JDY A/cs”. I wish someone would file a PIL in a HC/SC to prevent this “robbing Paul to pay Peter” policy of Banks. People have all the time to file PILs on Santa-Banta jokes, but not on important social/national issues like this one !

        Reply

          • Ramesh

            Mr. Basavaraj – I agree that Banks are free to levy reasonable ‘charges’ for the services they render. But, in this case, the Banks (esp. SBI Chairperson ) publicly admit that they need funds to maintain JDY A/cs and hence justify raising MAB manyfold for regular S.B. A/cs. That’s both unethical and unfair. Why should regular S.B. A/c holders bear the burden of Banks having to maintain JDY A/cs ? I strongly believe the Govt ought to compensate Banks for fulfilling its welfare schemes for the masses. It’s a pity there’s no Bank customers’ Association to protest against such unilateral policies of Banks, like there are unions of Bank staff/officers etc.
            While many regular S.B. A/c holders (esp. in Metros and urban areas) will grudgingly maintain the new MAB norms, many will choose to close multiple A/cs else move to private Banks who provide far better services compared to their Public Sector counterparts.

            Reply

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