Most of us set aside some money for contingencies .Some of us have some short term plans for their money hence they do not invest in any instruments thinking that they will get at least an interest at 3.5% in their bank’s saving account.
This brings us to the title of this article how is the bank interest calculated?
The amount of interest will be calculated for each calendar month on the lowest balance in credit of any account between the close of the tenth day and the last day of each month. Most banks pay interest on a half yearly basis or on quarterly basis.
Let us understand this better with an example
Say you keep the minimum balance of 5000 .Over and above that you sold a property and you got 16 lakh rupees. You kept in the bank on 11th March 2009 and then invested it in a fixed deposit on 31st March 2009.. In the above case you will get interest for the minimum balance from10th March to 31st March (i.e.Rs.5000). Which means you will not get any interest on the 20 days for the 16 lakh that you kept in the bank
Presha Investments suggests Liquid funds for such short tenures.
For better understanding of liquid funds read article [Liquid v/s Short Term deposits] or click here
However there is a silver lining for the future
As per the Monetary Policy 2009-10, the 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.That means that for each day the money stays in the bank you will get interest @ 3.5% p.a. Calculated on daily basis
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