The full form of AMB in banking is Average Monthly Balance. It refers to the average amount a customer must maintain in their bank account each month to avoid penalties or additional charges. AMB is one of the most important parameters banks use to ensure customers keep a minimum balance in their savings or current accounts. It varies from bank to bank and depends on the type of account and location of the branch.
What Is Average Monthly Balance (AMB)?
Average Monthly Balance is the average of all daily closing balances in a customer’s account during a month. Unlike a simple minimum balance requirement, AMB considers the balance maintained on each day of the month. This gives a more accurate picture of how consistently the customer maintains funds in the account.
For example, if a bank requires an AMB of ₹5,000, the total of daily closing balances for the month must be equal to or greater than ₹5,000 × number of days in that month.
How Is AMB Calculated?
The formula for calculating AMB is:
AMB = Sum of all daily closing balances in a month ÷ Number of days in that month
Banks automatically compute this amount and inform customers via monthly statements, SMS, or net banking alerts. If the required AMB is not maintained, the bank may charge a penalty.
Why Do Banks Use AMB?
1. Encourages Regular Balance Maintenance: AMB helps banks ensure that customers maintain stable account balances, improving liquidity and reducing operational costs.
2. Supports Banking Services: Maintaining AMB allows banks to offer free services like ATM withdrawals, cheque books, and fund transfers.
3. Discourages Dormant Accounts: By requiring a steady balance, banks prevent accounts from lying inactive for long periods.
Consequences of Not Maintaining AMB
If the customer fails to maintain the required AMB, the bank may impose:
- Penalty charges
- Restrictions on certain services
- Additional fees for transactions
These charges vary across banks and depend on account type and region.
Conclusion
AMB, or Average Monthly Balance, is an essential concept in banking that ensures customers maintain a healthy account balance. Understanding AMB helps customers avoid penalties, manage their finances better, and enjoy uninterrupted banking services. Whether you hold a savings or current account, staying aware of AMB requirements keeps your banking smooth, efficient, and hassle-free.