What do you know about the initial funding of an account?
Well, the initial funding of an account is the amount that you need to deposit when an account number is generated for the first time.
Other than initial funding, you may come across MAB or QAB, which stand for Monthly Average Balance or Quarterly Average Balance.
Let’s learn more about MAB and QAB.
What it implies, is that we will also see if withdrawing initial funding, or, as you may say, keeping your account balance below the minimum balance required, is a good idea or not!
What is MAB or QAB?
To simplify your understanding, here’s what MAB and QAB mean. Monthly and Quarterly average balances are the limits set by the bank within which you need to maintain a certain balance in your account at any cost.
The amount of it is as low as ₹ 500 and as high as ₹ 5 lacs. Savings Bank accounts normally have a lower MAB in PSU banks such as State Bank of India, Punjab National Bank, and other PSUs.
Generally, private Banks such as Axis Bank Ltd., HDFC, and ICICI keep a higher MAB or QAB.
Non-maintenance of MAB and QAB will attract a penalty in your savings Bank account. These penalties vary from bank to bank. The big question here is, is there any bank account that is without the stipulated MAB or QAB?
Penalties for non-maintenance
If you do not maintain the required minimum fund in a savings Bank account, the bank may levy penalties. How much the bank imposes these penalties on you depends on where you bank.
The bank usually advises you to deposit an initial amount that would cover the required MAB or QAB.
Some banks, such as SBI Savings Bank accounts, do not require maintenance of a minimum balance, earlier it was there, but it keeps on and off, you know.
Other banks stipulate this initial funding is between ₹ 1000 and 5 lacs. Higher initial funding normally goes to a wide variety of current accounts.
Generally, banks may charge you as little as ₹500 to as high as ₹5000. Either way, it’s not wise to give away funds without good reason.
An Account that doesn’t require stipulated MAB or QAB
Yes, there are accounts that do not require the maintenance of a minimum balance. These accounts are basically for limited purposes. We called it a Zero Balance Account or a Nofrill Account. It’s also known by various other names, such as SBI Tiny Account.
These accounts are specially designed for low-income groups, so owning them would not do much. You would not be able to transact normally. It has no Internet banking, no ATM, and no cheque. The transaction can be done only at the branch with the presentation of the passbook/ account book, and transaction slips.
So, we have seen that maintaining the required minimum balance in a savings Bank account would be wiser than withdrawing it.
Savings Banks and Current accounts have different initial funding requirements. Actually, when we look deeper, there is a difference in the meaning of initial funding and MAB/QAB.
Initial funding is an initial deposit in the newly opened account, which is totally up to you. Although the bank may advise you to deposit a certain amount of funds that would cover the required MAB or QAB. But you may deposit a higher amount too.
Whereas the required MAB or QAB is the balance you need to maintain at any cost to avoid getting penalized for not maintaining the minimum average balance in your account.
If you don’t, your Bank may penalize you or levy charges against the time period you are short.