How to Calculate Average Monthly Balance and Avoid MAB Charges in Your Savings Account

Most people believe that keeping money in a savings account is enough. What they do not realise is that it is not the lowest balance that matters, but the average monthly balance quietly calculated every single day. This is where many account holders lose money without understanding why bank charges keep appearing. Let us understand the importance of the average monthly balance.

What is Average Monthly Balance (AMB)?

Average Monthly Balance (AMB) is the average amount of money maintained in a bank account over an entire month. It is calculated by adding the closing balance of the account for each day of the month and then dividing the total by the number of days in that month.

Banks usually prescribe a minimum AMB requirement for savings accounts. If the account holder fails to maintain this required average balance, the bank may levy penalty MAB charges.

MAB charges mean the fees a bank applies when you do not maintain the required Monthly Average Balance in your account. The amount charged depends on the bank, the type of account, such as savings or current, and whether the branch is in an urban or rural area.

Compared to a fixed daily minimum balance system, AMB offers greater flexibility because short-term fluctuations in the account balance are adjusted over the month, as long as the overall average meets the bank’s requirement.

How to Calculate Average Monthly Balance (AMB)?

You can calculate your Monthly Average Balance (MAB) by finding the average amount of money that stayed in your account throughout the month. Banks use this number to check whether you are maintaining the required minimum balance and to decide if any charges apply.

The simple formula is
(Sum of all daily closing balances) ÷ (Number of days in the month)

First, look at your bank statement or mobile app and note the closing balance for each day of the month.
Next, add up all those daily closing balances.
Finally, divide that total by the number of days in the month. Remember, some months have 30 days, some have 31, and February has 28 or 29.

Imagine this situation. 

For the first 12 days of the month, your account balance stays at ₹8,000. After that, you receive some money, and for the next 18 days, your balance remains at ₹18,000. Let us assume it is a 30-day month.

Here is how the calculation works:
(₹8,000 × 12 days) + (₹18,000 × 18 days)
= ₹96,000 + ₹3,24,000
= ₹4,20,000

Now divide this total by the number of days in the month:
₹4,20,000 ÷ 30
= ₹14,000

So, your Monthly Average Balance for that month is ₹14,000.

Here are simple and practical tips to maintain AMB, written in a clear, everyday way.

Penalties for Non-maintenance of Monthly Average Balance (MAB)

When you do not maintain the required Monthly Average Balance in your bank account, the bank may charge a penalty. This charge is applied because the average balance for the month falls below the limit set for your account type.

How MAB penalties are usually charged

• Percentage of shortfall
  Some banks charge a percentage of the amount by which your balance falls short of the required MAB.
  
• Fixed charges
  Many banks apply a flat fee if your average balance drops below a specific level.
  
• Tier-based charges
  In some cases, the penalty depends on how low your balance goes and the branch location, such as rural, semi-urban, urban, or metro.
  

Examples of potential MAB penalties

Note: These charges are indicative and may change based on the bank’s current policy, the type of account, and the branch location. Always check the latest applicable charges with your bank.

How to Maintain Average Monthly Balance (AMB)?

Wondering how to maintain an average monthly balance that doesn’t attract penalties? 

Here are some tips for maintaining AMB that you should keep in mind-

• Know your minimum balance clearly
  Every bank and account type has a different AMB requirement. Check the exact amount for your account so you know what balance you need to maintain through the month.
• Keep a small buffer amount
  Do not aim to keep exactly the minimum balance. Always maintain a little extra so that small debits, charges, or failed calculations do not pull your average below the limit.
• Avoid big withdrawals at the start of the month
  Withdrawals made early in the month reduce your daily balance for many days. If possible, plan larger expenses towards the middle or end of the month.
• Track your balance regularly
  You should use your bank app or net banking to check your balance every few days. Regular tracking helps you correct things before charges apply.

Use one of the most trusted wealth management apps to track, monitor, and keep a check on your daily transactions with greater clarity and control.

• Turn on low-balance alerts
  You must activate SMS or email alerts so the bank notifies you when your balance drops close to the minimum requirement.
• Automate monthly deposits
  It is important to set up an automatic transfer from another account or salary credit so a fixed amount comes in every month and supports your average balance.
• Reduce the number of active accounts
  Managing multiple accounts makes it harder to maintain AMB in each. Keeping one primary account often makes balance management easier.
• Choose the right account type
  If maintaining AMB feels stressful every month, consider switching to a zero-balance account or a salary account if you are eligible.

These small habits make AMB maintenance predictable and prevent unnecessary penalty charges from quietly eating into your money.

QAB Meaning

QAB stands for Quarterly Average Balance. It is the minimum average balance a bank asks you to maintain in your savings or current account over a period of three months.

The bank calculates QAB by adding your closing balance for each day in the quarter and dividing it by the total number of days in that quarter. If this average falls below the bank’s required limit, penalty charges may apply.

QAB is generally more flexible than monthly average balance because short-term drops in balance can be adjusted over the remaining months of the quarter.

Average Monthly Balance vs Quarterly Average Balance: How Banks Track Your Money Every Day

Once you know how average balances work and follow simple habits to maintain them, you can avoid unnecessary charges and manage your savings account with far more confidence.

Know the difference between a salary account and a savings account, understand how balance rules apply to each, and choose the account type that best fits your income and spending pattern.

If you receive a salary, understanding every component of it is just as important as managing your bank balance. One key part many people overlook is House Rent Allowance. Learn in detail what is HRA in salary, how it is calculated, and how it can help you reduce your taxable income while planning your monthly finances more efficiently.

AMB vs QAB – FAQs