Both public sector and private sector banks are levying charges on customers for not maintaining minimum balance in their savings bank account. In the year 2017-18, 21 public sector banks and three major private sector banks collected Rs 5,000 Crores from customers, for not maintaining a minimum balance in their accounts.
It’s very important to maintain a minimum average balance (MAB) in a savings bank account to avoid paying penalties. Yet, many people neglect maintaining the minimum average balance in their savings bank account.
Minimum Average Balance is the average of all the closing-day balances in a given month. MAB is calculated by adding each day's end of the day balance and dividing it by the number of days in that month.
Let us assume that a bank asks that you maintain Rs 5,000 as average monthly balance:
On May 1, the balance in the account was Rs 8,000.
On May 12, Rs 4,000 was withdrawn. EOD balance is Rs 4,000.
On May 18, Rs 10,000 was deposited. EOD balance is Rs 14,000.
Summing up the EOD balances: For 11 days-from May 1 to May 12-sum of EOD balance will be Rs 8000 * 11 = Rs 88,000
From May 12 to May 18, sum of EOD balances will be Rs 4000 *6 = Rs 24,000
From May 18 to May 31, sum of EOD balances will be Rs 14000 * 13 = Rs 1,82,000.
Sum of all the EOD closing balances = Rs 2,94,000.
Total number of days in May = 31
So, the minimum average balance will be 2,94,000/31= Rs 9483.87.
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The minimum average balance to be maintained varies from bank to bank and branch to branch. The MAB to be maintained in metro/urban branches will be usually higher than semi-urban/rural branches.
1. If a customer fails to maintain the minimum average balance in his savings bank account as agreed between the bank and the customer, the bank should inform the customer through SMS, email or a letter. The message states that if the minimum balance is not restored in the account within a month from the date of the notice, a penalty will be levied.
2. If the customer does not restore the minimum balance within a specified time period, the penalty will be charged after informing the account holder.
3. The policy on the penalty to be levied for account holders will be decided with the approval of the Board of the bank.
4. The penalty levied on the customers should be a fixed percentage on the amount of difference between the actual balance maintained and the minimum balance to be maintained as agreed at the time of opening of the account.
5. Banks should ensure that the penalty charged on the customers are reasonable and it should not exceed the average cost of providing the services. Banks should also ensure that the balance in the savings bank account does not turn into a negative balance just because of penal charges for not maintaining the minimum balance.