Payment of Interest on Savings Bank Account on a Daily Product Basis

Interest on Savings Account

Well, the party is (almost) over for banks in India. Seriously, with the kind of interest calculation method being currently used for saving account holders it indeed is a party for the bank to enjoy such an enormous amount of free float at the cost of the janta.

Hopefully if the banks don’t make some lame excuses to push the deadline, come April 2010 the deposits in our savings account should earn us more by way of interest. That’s because the Reserve Bank of India has asked banks to start calculating interest rates on these accounts on daily basis from April 1, 2010.

Checkout the RBI directive issued in April 2009.

Banks currently calculate interest on the lowest available balance, from 11th and the last date of a month. In the existing system, if one withdraws certain amount from his savings accounts on the last day of a month, he will lose interest on that amount for the whole month.

For example, if you have Rs 1,000 on say on December 10 and deposit say Rs 1 lakh on December 11, and withdraw Rs 1 lakh on January 30, then you will get interest on only Rs 1,000 for the entire period of 51 days. Similarly, if you deposit Rs 1,000 on say July 11 and withdraw it on August 31, then the bank enjoys the full amount of Rs 1,000 without paying any interest. You will get zero interest.

But, under the new system, even if he withdraws in the last day of the month, he will get the interest income on the first 29 days of the month.

It is told that some banks are resisting to the switchover to the rational system of paying interest on a daily balance basis from first April 1, 2010, by providing all types of excuses. And why not when they (banks) can enjoy the free float at the cost of the common man, who now sincerely hopes that the RBI would ensure that the banks comply with the directive from April 1, 2010.

Photo credit: net_efekt

If you enjoyed this post, make sure you subscribe to my RSS feed!

Check out these posts:
Author: Austin Comments: 2 comments Date: 20 Feb 2010
Categories: Banks Tags: , ,

There are 2 comments. Leave a comment!

  • ¬ sudhir Lad
    #6885 July 17th, 2010 at 8:17 am

    As per RBI latest guidelines saving interest is calculated on cheque deposited amount or product will be calculated after cheque is passed

  • ¬ Arijit
    #6959 August 10th, 2010 at 9:56 am

    Hi,

    So, acc to the guidelines, is it better to park one’s money in an RD or in the savings account?

    For example, if i have to do an RD of 10 K per month, I know i will get 7.4 percent at Axis Bank. But, if I keep my money every month in the savings account itself, will it earn me more interest at the end of 3 years?

    Arijit

Name (Req)

E-mail (Req)

URI

Message
CommentLuv Enabled

Powered by WP Hashcash