Everyone has a savings bank account, but all are not aware of the interest earned on that account. When we maintain some balance in our savings account we get interested in few percents, the RBI has decided the interest rate to be 4% annually, which is followed by all the banks as per the RBI guidelines. RBI brought some changes in the norms banks became free to decide their own rates according to their liquidity and profit.
Calculation of Savings Bank Account Interest Rates
Previously the way of calculating interest was so unfair, it was calculated on the lowest balance available in the account. The depositor doesn’t get the full benefit from that. But, from April 2010 onwards, the method of calculation is changed. It is calculated by the daily balance method.
For example: let’s say that your bank pays you an interest rate of 6% on your savings bank account. The interest rate will be calculated like this:
On 1st: Balance in the account is Rs 5 lakhs
On 21st: Draw Back Rs. 2 lakh ‘ Balance in the account is Rs 3 lakhs
On 25th: Deposit Rs. 1 lakhs ‘ Balance in the account is Rs 4 lakhs
On 31st: Balance in the account is Rs 4 lakhs
Your savings bank interest amount will be calculated at 6% on Rs 5 lakhs for 20 days, Rs 3 lakhs for 4 days, and Rs 4 lakhs for 7 days. So the profit, you will get will depend upon the daily balance, as in the earlier method the interest will be calculated on the minimum balance in the account that is Rs 3 lakhs.
Before shifting your savings account, think twice as all the banks don’t offer the same interest rate.
Things to look out for before you shift your Savings Bank accounts based on the interest rate:
- The minimum balance maintained while closing the account.
- The service charges and various other fees to be paid.
Saving accounts should offer you different benefits apart from earning interest rates.
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