SBI reduces monthly average balance requirement to Rs 3,000; here's how MAB gets calculated

The country's biggest bank, State Bank of India (SBI) has reduced the monthly average balance (MAB) requirement to Rs 3,000 from Rs 5,000 earlier. The revised charges for urban, semi-urban and rural centres are Rs 3,000, Rs 2,000 and Rs 1,000 respectively. The bank has also revised penalty for non maintenance of MAB. It will now attract 20% to 50% lesser charges across all population groups and categories. So the penalty for semi-urban and rural centers range  will be between Rs.20 and Rs 40 while  people from urban and metro centers have to shell out anywhere betwen Rs 30 and Rs 50.

"This is in addition to the already exempted categories under PMJDY (Prime Minister's Jan Dhan Yojna) accounts and Basic Savings Bank Deposits Accounts (BSBD)," the SBI said in a statement.  

The revised requirement will come into effect from October 2017.

Few things about Monthly Average Balance (MAB) that you must know

What is Monthly Average Balance?

Unlike the common perception among account holders that Monthly Average Balance (MAB)means that a  stipulated amount of money is parked in their account at all times, the former is actually the sum total of the amount of money at the end of each day of the month divided by number of days of the month. This includes all working days and bank holidays are included in the number of days in the month.

How is it calculated?
Let's understand with a hypothetical example. Suppose you have a balance of Rs. 10,000 on Sept 1 in your savings bank account. And you withdrew Rs. 10,000 on Sept 5 but deposited Rs. 10,000 on Sept 20, here is how your MAB for the month will be:
Balance from Sept 1 to Sept 4: Rs. 15,000*4 = Rs. 60, 000
Balance from Sept 5 to Sept 19: Rs. 5,000*15 = Rs. 75,00
Balance from Sept 20-Sept 31: Rs. 15,000*12 = Rs.  1,80,000
Balance Rs. 60,000 + Rs. 75,000 + Rs. 1,80,000 = Rs. 315,000

As MAB is the sum of total balance at the end of each day of the month divided by number of days of the month , therefore it is  Rs. 315,000/31 = Rs. 10161.29

Does MAB differ across banks?
Yes, it varies across banks and type of accounts. You must check it up with banks at the time of opening the account. Also, the minimum balance requirement in public sector banks is usually lesser than private banks. Take for instance, ICICI Bank which requires maintaining a minimum balance of Rs 10,000 for urbans and Rs 5,000 for semi-urban account holders under its Easy receive account.