Finance

Awareness Fridays: Payment of Interest on Savings Bank Accounts Will Now Be On a Daily Product Basis

Up to now, interest on savings account balances were calculated on the minimum balance in the account during the period from the 10th day to the last day of each calendar month. With this archaic method (introduced way back in 1987), you’d lose out on earning interest each time you withdrew money on or after the 10th of the month — any fresh deposits you made wouldn’t count too.

Starting April 01, 2010, the Reserve Bank of India is bringing about a significant change in the way the interest on the balance in your savings account is calculated. According to this circular:

Interest on balances in savings bank accounts would now be calculated on a daily product basis with effect from April 1, 2010.

What this means is that the interest will now be calculated on the balance in your savings account at the end of each day. This, in my opinion, is a fair way and you as a savings account holder stand to gain financially — in terms of the interest paid for your balances.

Another step in the right direction. The Indian financial system is slowly but surely maturing. What do you think?

Awareness Fridays is my initiative to spread awareness on topics relevant to personal finance — every Friday. I urge you to take some time off and absorb this information — it’s pretty useful. And, as always, do spread the word if you find this useful.

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