What do you know about initial funding of an account? Well, initial funding of an account means 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 stands for Monthly Average Balance or Quarterly Average Balance.
Let’s find out about MAB and QAB. What it implies and we will also see if withdrawing initial funding or you may say keeping your account balance below minimum balance required is a good idea or not!
What is MAB or QAB?
To simplify your understanding, here’s what MAB and QAB means. Monthly and Quarterly average balance is the limit set by the bank in 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 account normally has lower MAB in PSU banks such as State Bank of India, Punjab National Bank and other PSUs.
Generally it’s seen private Banks such as Axis Bank Ltd, HDFC and ICICI keep higher MAB or QAB.
Non maintenance of MAB and QAB will attract penalty in your savings Bank account. These penalties vary from bank to bank. The big question here is, is there any bank account which is without the stipulated MAB or QAB?
Penalties for non maintenance
If you do not maintain the required minimum fund in savings Bank account, bank may levy penalties. How much bank impose these penalties on you depends on where you bank.
Bank usually advise you to deposit an initial amount which would cover the required MAB or QAB.
Some bank such as SBI Savings Bank account do not require maintenance of minimum balance, earlier it were there, it keeps on and off, you know.
Other bank stipulate these initial funding in between ₹ 1000 to ₹ 5 lacs. Higher initial funding are normally goes to high varient current account.
Generally bank may charge you as low as ₹ 500 to as high as ₹ 5000. Either ways, its not wise to give away fund without good reason.
Account that don’t require stipulated MAB or QAB
Yes, there are accounts which does not require maintenance of minimum balance. These accounts are basically with limited uses. We called it Zero balance account or Nofrill account. It’s also known by various other names such as SBI tiny account is one of them.
These accounts are specially for low income group so owning it would not do much. You would not be able to transact normally. It has nointernet banking, no ATM, no cheque. Transaction can be done only at branch with the presentation of passbook/ account book and transaction slips.
So, we have seen that maintaining the required minimum balance in savings Bank account would be wiser than to withdraw it.
Savings Bank and Current account have different initial funding requirement. 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 open account, which is totally upto you. Although bank may advise you to deposit a certain amount of fund which would cover the required MAB or QAB. But you may deposit higher amount too.
Whereas the required MAB or QAB is the balance you need to maintain at any cost to avoid getting penalised for not maintaining the minimum average balance in your account.
If you don’t, your Bank may penalise or levy charges against the time period you are shortfall.