The world of banking is filled with numerous terminologies, but few are as frequently encountered and crucial as the Monthly Average Balance, often abbreviated as MAB. Whether you’re opening a new bank account or managing an existing one, This banking term doesn’t only impact your pocket, but is also a key metric of the financial discipline you hold. In essence, MAB is the average amount a bank expects you to maintain in your account over a month. Now, you might wonder, why is it so significant? As we delve deeper, you’ll discover that maintaining the required MAB can help you avoid unnecessary penalties, benefit from additional banking services, and essentially pave the way for a smoother banking experience. Understanding Monthly Average Balance Let’s take a detailed look into what this term means. The Monthly Average Balance is quite literally what its name suggests – an average. It’s the sum of all the end-of-day balances in a month divided by the number of days in that month. For instance, if you have ₹10,000 in your account for 15 days and ₹20,000 for the next 15 days of a 30-day month, your MAB would be ₹15,000. This brings us to another term – the end-of-day balance. It’s the amount present in your account at the close of business each day. While the end-of-day balance gives you a day-to-day snapshot, the MAB provides a broader, monthly perspective. In many ways, the MAB acts as a financial health check, indicating how consistently you’ve maintained funds in your account over a given month. This distinction is crucial because even if you end a month with a significant amount, it doesn’t necessarily mean you’ve maintained a healthy MAB throughout that month. The bank looks at the bigger picture, and that’s where MAB comes into play. Why Banks Emphasise on MAB? Banks aren’t just financial institutions where you keep your money; they play a pivotal role in the country’s economy. One of their primary tasks is to ensure liquidity, which means they should
Author: Neha Roy
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