Savings Account Interest Calculation
Interest calculation on Savings Accounts has become much simpler after 2010.
Pre-2010
Very few people know that earlier, banks would calculate interest on the lowest balance held between the 10th and the last day of the month. So, if your account had a minimum balance of Rs.1000 during the said period, then the bank calculated interest for the month on Rs.1000 only, regardless of how much balance you had in the rest of the month.
In 2009, the RBI released a circular mandating all banks to calculate interest on a daily product basis as opposed to the methodology followed earlier.
Post-2010
Today, the interest on a Savings Account is calculated as follows:
Savings Account Interest=Daily Balance ×Rate of Interest ×Number of Days365 ×100
Let’s understand the calculation of how banks calculate interest on savings accounts in India with the help of an example:
Rajeev has a Savings Account with a bank that offers an interest rate of 4% per annum. Here is a look at his account in May 2022.
Click here
Date | Opening Balance | Deposits | Withdrawals | Closing Balance |
01-May-2022 | 200,000 | - |