MAB stands for Monthly Average Balance in banking. It refers to the average balance that customers must maintain in their bank account during a month to avoid penalties or charges. Banks in India commonly use the MAB requirement to ensure account activity and maintain minimum operational costs. Understanding MAB is important for every account holder to avoid unnecessary deductions.
What Is Monthly Average Balance (MAB)?
Monthly Average Balance is the average of the closing balances maintained in a savings or current account throughout a month. Instead of checking the balance on a single day, banks calculate the average over all days of the month and compare it with the required MAB.
For example, if a bank requires an MAB of ₹5,000, the account holder must ensure that the average closing balance for the entire month equals or exceeds ₹5,000.
How Is MAB Calculated?
Banks use a simple formula to calculate MAB:
MAB = (Sum of daily closing balances in a month) ÷ (Total number of days in the month)
This method gives a fair calculation because it accounts for fluctuations in balance. Even if the balance drops on certain days, maintaining a higher balance on other days can help achieve the required average.
Why Do Banks Require MAB?
Banks impose an MAB requirement for several reasons:
1. To Cover Operational Costs
Maintaining customer accounts involves administrative expenses. MAB helps banks recover these costs.
2. To Encourage Account Stability
Regular balance maintenance reduces the risk of dormant or low-activity accounts.
3. To Improve Liquidity
A stable deposit base helps banks manage lending and withdrawals efficiently.
What Happens If MAB Is Not Maintained?
If the account balance falls below the required MAB, banks may:
- Charge a non-maintenance penalty
- Reduce account benefits
- Convert the account to a basic savings account (in some cases)
These penalties vary from bank to bank.
Conclusion
MAB, or Monthly Average Balance, is an important concept for bank customers in India. Maintaining the required MAB helps avoid charges while ensuring smooth account operations. By tracking your balance regularly and understanding your bank’s specific requirements, you can manage your account efficiently and avoid unwanted fees.