All you need to know about a savings account’s average monthly balance

Posted on Wednesday, January 31st, 2024 | By IndusInd Bank

A savings account is your all-time financial partner, which not only helps you manage your daily finances but also offers the dual benefits of security and growth. When opening a savings account, you will often come across the term Average Monthly Balance (AMB). However, don’t be quick to dismiss it as just a banking term. This simple yet significant concept plays a key role in how you manage your savings account.

With that in mind, let’s understand what an average monthly balance is exactly, how it affects your account, and why banks emphasise it. 

Understanding what AMB means in banking

AMB is the minimum average balance you must maintain in your bank account over the specified period. The period is typically a month. Each bank can set its own AMB requirement based on the type of account and the services it offers.

An insufficient AMB may lead to the imposition of certain charges and penalties. These fees also differ from bank to bank, reflecting different policies and AMB requirements. However, some banks offer a grace period, a specific time frame during which you can restore your balance without penalty.

How to calculate the monthly average balance?

Every day, from the first to the last day of the month, the bank records the closing balance in your savings account. After that, they add up the balances and divide the total by the number of days in the month. That’s it.

Here is the formula to calculate AMB:

AMB = Total of Everyday Closing Balance/Total Number of Days

Let’s say you maintained a balance of ₹10,000 for 15 days and ₹15,000 for the remaining 15 days of the month, your AMB would be calculated as follows:

(10,000 x 15 + 15,000 x 15) / 30 = ₹12,500 (approximately)

Note that AMB is specific to each month, and the calculation is done monthly. This differs fromthe Average Quarterly Balance (AQB), where the balance is computed over a quarter (i.e., three months) at a time.

Smart tips to maintain a healthy average monthly balance

From opening a digital to practising smart withdrawals and deposits, the following are some tips to maintain a healthy AMB.

1. Set up automatic transfers: To maintain a sufficient balance in your savings account without any direct involvement, consider arranging an automated monthly transfer from another account. Schedule these right after your payday and opt for an account with low or no minimum balance requirements to facilitate these transfers.

2. Monitor your account regularly: Use mobile banking apps or online banking services for this. They often provide real-time updates on your balance through push notifications and even text messages. This habit helps you react quickly if your balance is nearing the minimum requirement.

3. Use your additional funds wisely: Deposit tax refunds, bonuses, subsidies, or cash gifts into your savings account only. This not only helps you maintain the AMB but also amplifies the interest. After all, the more money you deposit, the more interest you will earn.

4. Smart balance management: You can skilfully manage your AMB. For instance, if you need to maintain an AMB of ₹5,000, you have options. You can either keep a daily closing balance of ₹5,000 or have ₹1,55,000 in your account in just one day for a month that has 31 days. Both scenarios fulfil the requirement equally.

Simplify your savings with IndusInd Bank

From opening a digital or a zero-balance account to practising smart withdrawals and deposits, the following are some tips to maintain a healthy AMB.

1. Set up automatic transfers: To maintain a sufficient balance in your savings account without any direct involvement, consider arranging an automated monthly transfer from another account. Schedule these right after your payday and opt for an account with low or no minimum balance requirements to facilitate these transfers.
2. Monitor your account regularly: Use mobile banking apps or online banking services for this. They often provide real-time updates on your balance through push notifications and even text messages. This habit helps you react quickly if your balance is nearing the minimum requirement.
3. Use your additional funds wisely: Deposit tax refunds, bonuses, subsidies, or cash gifts into your savings account only. This not only helps you maintain the AMB but also amplifies the interest. After all, the more money you deposit, the more interest you will earn.
4. Smart balance management: You can skilfully manage your AMB. For instance, if you need to maintain an AMB of ₹5,000, you have options. You can either keep a daily closing balance of ₹5,000 or have ₹1,55,000 in your account in just one day for a month that has 31 days. Both scenarios fulfil the requirement equally.

Simplify your savings with IndusInd Bank

Now that you know how to calculate your monthly average balance, make sure to maintain it to avoid penalties and keep a positive banking relationship.

If maintaining this balance seems like a task, consider the Indus Delite Instant Savings Account. You can open this zero-balance savings account right from your home and enjoy the best services and rewards. Simply fill out an application form, keep your documents like Aadhaar and PAN card ready, and complete the video-KYC process. That’s it! Get an opportunity to earn an attractive interest rate from day one, unlock delightful deals like 20% off on Swiggy and Big Basket, enjoy 5% cashback on debit card spends, and even benefit from complimentary insurance cover of ₹1.5 lakh.

Don’t wait anymore! Open an IndusInd Bank Savings Account today.

Disclaimer: The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. Hence, you are advised to consult your financial advisor before making any financial decision. IndusInd Bank Limited (IBL) does not influence the views of the author in any way. IBL and the author shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information.