Interest on savings account to be calculated on a daily basis from next fiscal

Interest payable on savings bank accounts by scheduled commercial banks (SCBs) would be calculated on a daily product basis with effect from 1 April 2010, minister of state for finance Namo Narain Meena informed the Lok Sabha in a written reply today.

In the case of savings and term deposits, banks are required to pay interest at quarterly or longer rests. In the case of saving deposits, at present, interest is calculated on minimum balance to the credit of the deposit account during the period from the 10th to the last day of each calendar month and credited to the account only when it is Re1 or more, the minister stated.

According to the Reserve Bank of India (RBI) guidelines, banks are required to charge interest rate on loans at monthly rest with effect from 1 April 2002. Charging of interest on loans at monthly rests is, however, not applicable to agricultural advances where, for the convenience of borrower, interest rests are linked to crop seasons or harvesting/marketing season, he stated.

The changes have been made in view of the computerisation in commercial bank branches, the minister added.