Savings Bank a/c may earn more- Payment of Interest on Savings Bank Account on a Daily Product Basis

At present, interest on savings bank accounts is calculated on the minimum balances held in the accounts during the period from the 10th day to the last day of each calendar month. Several banks have suggested that interest on savings bank accounts may be calculated either on the minimum balances in the deposit accounts during the period from the first to the last day of each calendar month or on a daily product basis.

The matter was referred to the IBA, which was of the view that payment of interest on a daily product basis would be feasible only when computerisation in banks is completed. In view of the present satisfactory level of computerisation in commercial bank branches, Reserve Bank of India has announced in it's Annual Policy Statement 2009-10 on 21st April 2009 that:

• payment of interest on savings bank accounts by scheduled commercial banks (SCBs) would be calculated on a daily product basis with effect from April 1, 2010.

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. Now even the Rs 1 lakh balance in the savings account will earn the customer interest for the number of days it was in SB.

Thus savings bank account may start earning more interest from April 1, 2010. This may also result in customers keeping higher amounts in savings bank accounts.






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