After making usage of any bank ATM free, RBI now moves towards changing the interest calculation of savings accounts. It is really a good change and our savings accounts will earn a better interest income.
How savings account interest is calculated?
At the present time, banks are calculating the interest rate on the lowest amount available in your savings account from 10th to the end of month. The disadvantage is that if you have a low balance on any of these days, you will get interest on that amount only. For example:
If your account shows the following balance for the month of February 2010:
You will get interest only on 1,000/- rupees, which is the lowest balance available in your account at 3.5% per annum, which turns out to be, Rs. 2.92.
According to the new circular from RBI, banks have to calculate the interest on a daily product basis and this must be implemented from April 1, 2010. This way savings account holders will not lose interest for even a rupee.
Wonderful info! I actually fully loved the article – well-defined and to the point, just the thing I like
its grate infom i did not know thanks for sharing,
This is actually one & the same as earlier. Not going to effect on high evel, since interest rate is very low.
Only bank officers job they are increasing, bothing else.
Dear Sir,
Thanks for the information with a good example. Now I would request you to kindly calculate & inform with respect to above example the interest amount as per RBI guideline which is effective from 1/4/2010.
Dear Sir,
Thanks for sharing old interest calculation method with example.
I request you if a farmula can be framed for both old and new method with example, it would help us to understand in better manner.
Hi naveen, thanks for the example. can you give us same example with the new interest rate daily calculation. would be useful to us.
pls give the example of int calculation of savings account int. on daily basis
Hi Naveen,
Thanks for explaining the whole procedure of daily interest rate calculation with a good example.
Thanks
This is very nice to know. I came to know from my friend itself. Bunch of THANKS.
RBI circular does not ask banks to pay the interest as you say. The circular says banks are “advised” to pay on daily balance basis and hence it need not be on daily product basis.
Bank of India has replied to me that they are calculating on monthly product basis.
Thanks for this post found through google.
Yes…it is advised and lot of banks are following that. Don’t expect government banks to run through the competition. They don’t bother about it. I went to a government bank to take a new account. It took whole day to take the account with lot of mistakes in my full name and address and the debit card came with my name printed with spelling mistakes. I have several instances like this with govt. banks. Avoid them if possible. I have several accounts with private banks and they follow the rule to attract the customers and to retain the old ones.
Read these:
http://www.icicibank.com/Personal-Banking/account-deposit/savings-account/terms-conditions.html#tc13
http://www.axisbank.com/NewsPressReleases/earn-more.asp
thank u
Thanks for the information. I want to know if HDFC bank is also implementing this advise of daily interest calculation. Can some one help me out.
can you give us same example with the new interest rate daily calculation.
can you give us same example as how the new interest rate on daily basis is calculated
prabhu
Reply
For example, in a month if you have 1200, 750, 520, 350 on 1st, 2nd, 3rd, and 4rth day, rate of interest will be calculated as
balance x rate of interest/365
For the first day in the month, you have Rs.1200 and the amount you get as interest on that day would be 1200×4%/365=13 paise.
Hope this answers all your doubts.
Now the reserve bank who controlls the SB interest rates have deregularised the rate of interest on SB account and Banks have their choice to pay interest on SB account according to their choice w.e.f Nov 2011
sir
i have tried to calculate the above decent amount of difference in the calculated and actual Interest Obtained for 2011 period in my SBH Account…..How to Justify the Difference