So if some bank is giving higher interest for amounts above 1 lac, that’s a secondary benefit for you, not the basis of selection of bank. While there are people who park their money in saving bank account for some time, but it does not happening with most people. If you see the average amount kept in saving bank account, it should not cross 1 lac for most of the people. You should be more interested in interest below 1 lac So if you have a balance of Rs 1,50,000 in your bank (lets say kotak bank), you will get 5.5% on 1,00,000 and 6% on 50,000. You must have seen some banks are now offering 6-7% of interest rate and they have dual interest rates, like 5.5% below 1 lac and 6% above 6% (in case of Kotak Bank), which means that you will be getting 5.5% on the amount below 1 lac and only on the difference amount above 1 lac, you will get 6% interest. High Interest on Saving bank from some banks So now, if you see the same example we discussed above, with the new method of interest calculation, the interest will be 4% on 5 lacs (Rs 1,369) for 25 days (from start of month to 25th) and on 10,000 for next 5 days (Rs 5) (26th – 30th). While RBI wants all the banks to pay the interest every quarter, each bank has its own criteria, like ICICI Bank pays it twice a year right now in Sept and March. So let’s say the interest rate is 4%, then you will get interest on daily basis for your closing balance and it will get accumulated, but it will be paid back to your account only after 3 or 6 months. “The interest has to be calculated on daily basis for the closing day balance” – It’s that simple. From Ap, as per the RBI circular on new guidelines on saving bank interest calculation this is the rule for interest calculation. Now a new method is used to calculate the interest on saving bank account which is very fair. You would have got interest only on Rs 10,000, which is just Rs 28. This was not a very customer friendly method because if you kept Rs 5,00,000 in your saving account for the whole month and on 26th, & let’s say you take out 4,90,000. How is interest on saving bank is Calculated ?Ĭoming to the main question, the procedure to calculate saving bank interest, we will first see how it was done earlier and then we will see how its done now.Įarlier, Banks used to pay 3.5% interest on the minimum balance between 10th and last day of the month. This has had a positive impact for customers, because now due to competition, banks like Kotak Bank and Yes Bank have started offering higher interest rates like 6% or 7% and using that parameter to attract lot of customers. But, RBI has recently de-regulated interest on saving bank account and now banks can decide the interest they want to pay on saving bank. Earlier all the banks had the same interest on their saving bank accounts, which was 4%, so a person had no choice in terms of interest rate, you would have got the same return with any bank. A lot of people do not know interest is calculated on their savings bank account.In this article I will explain all the aspects of interest on a savings bank account.
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