Here’s some good news for savings account holders. The savings account will yield 30 to 40 basis points more to the account holder from Wednesday with the banks shifting to the new method for calculating interest on savings deposits. Following the Reserve Bank guidelines, the banks would be required to calculate interest on savings deposits on a daily basis beginning April 1.
At present, the interest rate on savings accounts is calculated on the minimum balance held from the 10th day to the last day of each month.
Savings deposit yields an interest rate of 3.5 per cent and is credited to the account on a half- yearly-basis — in March and September.
The payment of interest accumulated, however, even after with the daily calculation would be as per the existing practise of at the end of six months.
“With the new norms coming into effect from April 1, the cost of funds for banks would increase between 30 and 40 basis points,” Bank of Maharashtra chairman and managing director Allen Pereira told PTI. “But it would be difficult to say how much of it would translate for individual savings account holders,” he said.
According to Corporation Bank executive director Asit Pal, the new calculation system on the daily balance would be beneficial for customers. Explaining the new provisions, he said, “supposing that you have Rs 500 in your account and next day it increases to Rs 700, interest rate of 3.5 per cent per annum would be payable on both Rs 500 as well as Rs 700 on a daily basis.”
With computerisation of banks, Pal said, it has become possible to calculate interest on each savings account on a daily basis. The Reserve Bank, while announcing the annual monetary policy for 2009-10 unveiled last April had said, “payment of interest on savings accounts by scheduled commercial banks would be calculated on a daily product basis with effect from April 1, 2010.”
Several banks have suggested that interest on the savings account may be calculated either on the minimum balance in the account from the first to the last day of each month or on a daily basis.
The matter was referred to the Indian Banks Association which said the payment of interest on a daily basis would be feasible only when the computerisation of banks is completed. The RBI proposal is based on the view that computerisation at commercial banks is satisfactory at present.