Thread: Your savings account will earn daily interest

Your savings account will earn daily interest

Your savings bank account can earn you more interest now. The Reserve Bank of India has issued a directive in its policy document that will change the way interest is paid on the minimum amount present in a savings bank account each day.

At present, the interest (3.5 per cent per annum) is calculated on the minimum balance held in the account from the 10th of each month to the last day of that month. So, if a bank customer has Rs 1 lakh in his savings account one day and then Rs 100 another day, the minimum balance taken for calculation of interest in the period would be Rs 100.

But, from April 1, 2010, the interest paid on the savings account will be on the daily minimum balance. In other words, even the Rs 1 lakh balance in the savings account will earn the customer interest, even if it is withdrawn later.

As per the new directive issued by RBI, only commercial banks will need to follow this new method of interest payment on savings accounts. Commercial banks include all banks other than co-operative ones.

RBI had received requests to change the present interest payment structure from the banks themselves. In its policy document issued on Tuesday, RBI said that banks had proposed two structures: Either interest should be paid from the first to the last day of each month, or on a daily basis.

RBI referred the matter to the Indian Bank's Association, which comprises of private as well as public sector banks, along with co-operative banks and foreign banks.

The association decided that calculation of interest should be done on a daily basis as this has become more feasible with banks increasingly adopting core banking solutions (which refers to the use of information technology platforms).

Bankers said that, though the new system will amount to higher interest payouts and may even result in a slight rise in the cost of funds, it can be managed. If the customer holds the money in savings account, banks' dependence on fixed deposits will decrease.

Bankers also said that this may result in customers keeping higher amount in NRI-related savings accounts.

The interest offered on savings bank accounts in India is much higher than what is offered on term deposits in many countries.

This means that the money will start earning higher interest even as it remains liquid and safe.

Source: Rediff

Originally Posted by Rameshjeee

Bankers said that, though the new system will amount to higher interest payouts and may even result in a slight rise in the cost of funds, it can be managed. If the customer holds the money in savings account, banks' dependence on fixed deposits will decrease.
This means that the money will start earning higher interest even as it remains liquid and safe.

Can someone do some number crunching and tell how much interest are they going to offer exactly after the new changes?

very useful infor rameshjee

thanks for the update as i was not aware of this and interest on daily basis will encourage people like me to keep something in savings account too

Is it same for salary account too or not.

Good one

The concept goes like this,
As per earlier system if u had 25000 in your savings bank from 1st of the month but withdrew 22000 on say 29th of the month as per earlier system u were entitled to interest only on Rs.3000 for the whole month.
As per the new system. w.e.f.2010, April 1, u are entitled to interest on Rs.25000 for 28 days and Rs. 3000 for balance 2 days.
So would be of real help to the Salary A/c holders.

^ very good. That explains a lot.

+Rep given.

yes very good post Jee.... but still it is from 2010 na lot of time is there still..!

Originally Posted by smoothvibes

very useful infor rameshjee

thanks for the update as i was not aware of this and interest on daily basis will encourage people like me to keep something in savings account too

Is it same for salary account too or not.

This applies to Salary Account too....

cool then i will wait for one year then will get interest on daily basis