Good News for all ,From 01.04.2010 Interest on saving bank will be calculated on daily product basis.The RBI has issued directive in this regard ,which is given at the end of the post.At present interest is calculated at Minimum balance in saving account from 10th of the month to last day of the month.Present system has following draw backs

1.  if you withdraw the money in last days of the month then you loose interest for the Full month.
2. If you have deposited the amount after 10th of a month ,you will not get any interest on that amount in the month of deposit.

I have prepared a calculator which will tell you the difference in between two calculation methods .In the calculator shown below ,calculation of interest in old and new method has been given ,as per example ,interest in new method is Rs. 1110/- ,whereas as per old method the interest is only Rs 15/-.So there is a Huge difference in both the methods.Actually new methods have a great difference in those account where person has deposited a certain amount in first few days and withdraw the similar amount during last day that month.You can calculate interest by changing deposit /withdrawal/rate of interest/days in months etc.

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RBI/2009-10/322
DBOD. No. Dir. BC 77/13.03.00/2009-10

February 19, 2010

All Scheduled Commercial Banks
(Excluding RRBs)

Dear Sir

Payment of Interest on Savings Bank Account on Daily Product Basis

Please refer to our circular DBOD. No. Dir. BC.128/13.03.00/2008-09 dated April 24, 2009 advising banks that in view of the present satisfactory level of computerisation in commercial bank branches, it is proposed that payment of interest on savings bank accounts by scheduled commercial banks would be made on a daily product basis with effect from April 1, 2010. Further, banks were advised that in order to ensure a smooth transition, they may work out the modalities in this regard.

2. We advise that payment of interest on savings bank accounts may be made by banks on a daily product basis with effect from April 1, 2010.

Yours faithfully

Chief General Manager-in-Charge
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Reserve Bank of India
Annual Policy Statement 2009-10

Part B. Developmental and Regulatory Policies 2009-10

II. Interest Rate Policy

(b) Payment of Interest on Savings Bank Account on a Daily Product Basis

88. 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, it is proposed 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.

Modalities in this regard will be worked out in consultation with banks.
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