Majority of bank either private or public ask the account holder to keep the minimum Maintenance balance to keep their account functional. Bank offers a lot of services like Net Banking, Mobile Banking, SMS Banking and much more for free or minimum charges. The bank cannot make an adequate profit out of the account due to the service cost and an additionally 3-6% of interest on the deposits made.
The bank primary source of income is by lending money. The money deposited by you will be used by the bank to lend money and earn interest. Hence the bank wants you to keep the money in the bank account to run the banking process smoothly. To keep the bank functioning Savings bank account is always offered with the Minimum maintenance balance cap and if the account holder fails to maintain the balance then the account will be charged with the fine/ penalty.
How Average Maintenance Balance Is Calculated?
With all the policy by the bank to keep the minimum balance in the account, it becomes extremely important to calculate the Minimum balance. Therefore, Average Maintenance Balance in the savings account must be calculated. The Average Maintenance Balance can be calculated on various bases some bank calculate it on a monthly bases and some on a quarterly base. While opening the bank account it must be noted. Whatever the case is the calculation of the AMB will be the same. The AMB or AQB will be calculated on daily bases meaning every day the minimum balance will be taken and added.
The formula for calculation of AMB is as follows-
Closing Balance of the day X The Number of Days Maintained
For Example- Here the Savings Account AMB will be on Monthly bases and is of Rs.5000/- and will be calculated for the month of March. The starting balance is Rs.8000/- and on 15 March an amount of 2000/- is withdrawn and on 20 March an amount of 1000 is again withdrawn. On 30th March an amount of Rs.1500/- is added to the account.
Calculation of AMB
By applying the formula Closing Balance of the day X The Number of Days Maintained we get
1-15 March- 8000 X 15= 120000
15-20 March- 6000 X 5 = 35000
20-30 March- 5000 X 10= 50000
30-31 March – 6500 X 1 = 6500
Adding all these number the AMB is 2,11,500 which is clearly greater than the required balance.
Guidelines of RBI on Minimum Maintenance Balance
Reserve Bank of India or RBI is the Central Banking Authority that provides Guidelines and instructions to the banks all over the country. RBI also provides the guidelines to the bank on how, when and on what conditions an account is penalized. Levy of charges for non-maintenance of minimum balance in the saving bank account is subject to the following additional guidelines-
- If the customer account has no minimum maintenance balance then the bank should notify the customer clearly by SMS/ email/ letter etc. After notifying if the customer does not restore the minimum balance within a month from the date of the notice the charges will be deducted.
- In case the minimum balance is not restored within a reasonable period, which shall not be less than one month from the date of the notice of shortfall, penal charges may be recovered under intimation to the account holder.
- The policy on penal charges to be so levied may be decided with the approval of the Board of the bank.
- The penal charges should be directly proportionate to the extent of shortfall observed. In other words, the charges should be a fixed percentage levied on the amount of difference between the actual balance maintained and the minimum balance as agreed upon at the time of opening of the account. A suitable slab structure for recovery of charges may be finalized.
- It should be ensured that such penal charges are reasonable and not out of line with the average cost of providing the services.
- It should be ensured that the balance in the savings account does not turn into the negative balance solely on account of levy of charges for non-maintenance of minimum balance.
