FinTech Glossary

Meaning

Average Daily Balance (ADB) is the average amount of money held in an account over a billing or statement period, calculated by adding the closing balance for each day and dividing by the number of days.

Business Context

Banks in India often use ADB to determine whether a savings or current account meets minimum balance requirements, and credit card issuers use a similar method to calculate interest charges on revolving balances.

How It is Calculated

To calculate ADB, the bank sums the end-of-day balance for every day in the period and divides the total by the number of days in that period, rather than relying on a single point-in-time balance.

Why It Matters for Businesses

Understanding ADB helps businesses avoid penalty charges for non-maintenance of minimum balances and better plan cash positioning across multiple accounts.