Now, savings accounts to get daily interest

PTI

• Change enforced by RBI directive

New Delhi, 01 April 2010: Millions of savings account holders across the country will get about 10 per cent more, as the Reserve Bank has asked banks to pay from Thursday a 3.5 per cent interest on a daily basis instead of taking the lowest deposit during the month for the purpose of computation. 

 
Now, the banks give interest of 3.5 per cent on savings accounts on the basis of the least deposit in an account between the 10th and the last day of a month. The interest is credited in the account twice a year in March and September.

New norms
“With the new norms coming into effect from tomorrow (Thursday), the cost of funds for banks would increase between 30 and 40 basis points,” the Bank of Maharashtra chairman and managing director Allen Pereira said on Wednesday. “But it would be difficult to say how much of it would translate for individual savings account holders,” he added.

At the end of February, all commercial banks had a total deposit of over Rs 44 lakh crore, including savings, current and fixed deposits.

The country’s largest lender, State Bank of India, has over 1.56 crore savings bank account holders. According to Corporation Bank executive director Asit Pal, the new calculation system on the daily balance basis would be beneficial for customers.

Explaining the new provisions, he said, “Supposing you have Rs 500 in your account and the next day it increases to Rs 700, the 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 the computerisation of banks, Pal said, it had become easier to calculate interest on each savings account on a daily basis.