🔸A lot of people feel that their balance in saving bank account should not go below Rs.10,000 on any given day, otherwise, there will be penalty charges and they make sure that they have a buffer of Rs.10,000 in their saving bank account all the time.
This means that their account should always have that much surplus. However, the way the monthly average balance is calculated is different and very simple.
🔸It simply means that the average of the all the closing day balance in a given month. So given a month, add up all the closing day balance and then divide it by the number of days in the month. If you have to put it as a formula it would be
➡️MAB = (Total of all the EOD closing balance)/(number of days in a month)
Let me show you an example. Let us say the month we are talking about is April. The minimum balance limit in your bank lets say is Rs.5000.
Keeping Rs.10,000 in a bank account for 15 days is same as keeping 5000 for full 1 month (10k * 15 days = 5k * 30 days)
Source: Jaagoinvestor
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