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Calculate Interest On Savings Account

    IndianMoney.com Research Team | Friday, July 10,2015, 01:17 PM
 

You open a savings bank account with a reputed bank. You deposit your money with the bank. The bank pays you interest on the money you deposit with the bank.

Banks used to pay interest on the money you deposit with them in the savings bank account at 4% a year. Now banks are free to fix the interest rates on their savings bank account based on liquidity and profitability. Some reputed banks offer an interest of 6% a year.

Calculate Interest on Savings Account

Banks used to pay interest on the lowest balance you maintain between the 10th day and the last day of the month in your savings bank account.

Let us understand this with a simple example:

Mr Dinesh has a savings bank account with a reputed bank and has a balance of INR 2 Lakhs for the first 20 days of the month. The bank pays an interest of 4% a year. He withdraws INR 1.5 Lakhs on the 21st of the month and has only a balance of INR 50,000 for the remaining 10 days of the month.

Old method used before April 1st 2010:

Balance of Mr Dinesh from 1st - 20th of the month – INR 2,00,000

 

Balance of Mr Dinesh from 21st -30th of the month – INR 50,000

 

Bank pays interest on the lowest balance Mr Dinesh maintains between the 10th day and the last day of the month.

 

The lowest balance is INR 50,000 on which interest is calculated.

 

Interest Formula:

 

                     = 4%   *    __30____    *   50,000   =    INR 165.

                                        365

Mr Dinesh gets INR 165 as interest on the lowest balance in his savings bank account (INR 50,000) between the 10th and the 30th days of the month.

 

New method used after April 1st 2010:

 

Balance of Mr Dinesh from 1st - 20th of the month – INR 2,00,000.

 

Balance of Mr Dinesh from 21st - 30th of the month – INR 50,000.

 

Old method:

 

If the interest on Mr Dinesh savings bank account was calculated by the old method the bank would pay = INR 165.

 

New method:

If the interest on Mr Dinesh savings bank account was calculated by the new method the bank would pay = INR 493.

 

Mr Dinesh gets an extra amount of INR 493 – INR 165 =   INR 328.

He gets more than 3 times the returns after the bank has shifted to the newer method of calculation.

The savings bank account is no longer humble. Many banks offer you a higher rate of interest than 4% a year. Some of the banks offer you even 6% a year.It is also easy to calculate interest on savings account. There are also additional features offered by savings bank accounts. You get discounts on gold coins as well as free insurance if you have a savings bank account.You can also avail a demat account if you have a savings bank account. So save early….Invest wisely.. and soon you will be on the path to riches.

IndianMoney.com Research Team

The research team at IndianMoney.com comprises of certified and experienced professionals who share the company's vision to make every Indian financially literate by equipping every Indian with right and unbiased advice. IndianMoney.com research team provides newsletters, articles, videos and FAQs on various financial products and concepts only to help you make wise financial decisions.

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