^{st}Apr. 2010 you will be earning interest on your saving bank account on a daily basis. This means that you will be earning more interest from your account than you did before. But how much more? Read this post to know. Before seeing how much we are going to earn as an interest now, let us first compare the two methods:

Old Method | New Method | |

Rate of Interest | 3.5% p.a. | 3.5% p.a. |

Interest calculated on | Minimum balance between 10th and last day of month | On a daily basis |

Interest credited on | Half yearly basis in March and September | Half yearly basis in March and September |

Date | Transaction | Deposit | Withdrawal | Balance |

1st Apr | Brought Forward | 2000 | ||

2nd Apr | Salary | 27000 | 29000 | |

5th Apr | House rent | 5000 | 24000 | |

11th Apr | Phone bill | 2000 | 22000 | |

12th Apr | Shopping | 5000 | 17000 | |

24th Apr | flight tickets | 8000 | 9000 | |

28th Apr | Shares sold | 3000 | 12000 |

**Calculating the bank interest according to the old method:**

Minimum balance between 10^{th}and last day of month = 9000/- Interest earned for this month= P*R*T/100 Where P= Principal amount= 9000 R= Rate of interest = 3.5 T= Time = 1 month = 1/12 year Note: I have seen some blogs where the writer has not changed the time to year. Since the rate of interest is given as per annum (i.e. yearly basis) so the time should also be in years. Using these values the interest comes out to be

**Rs. 26.25/-**This is the interest for the month of April. In a similar way interest for other months is calculated and the total interest is credited to the account in September and March.

**Calculating the bank interest according to the new method:**

We’ll use the same formula as above. However our principal amount will change.Principal | Time | Rate of Interest | Interest |

2000 | 1 day | 3.5% p.a. | 0.19 |

29000 | 3 days | 3.5% p.a. | 8.46 |

24000 | 6 days | 3.5% p.a. | 14 |

22000 | 1 day | 3.5% p.a. | 2.14 |

17000 | 12 days | 3.5% p.a. | 19.83 |

9000 | 4 days | 3.5% p.a. | 3.5 |

12000 | 2 days | 3.5% p.a. | 2.33 |

Total | 50.45 |

**Rs. 50.45/-,**which is almost double of what we were getting earlier.

**NOTE: You won’t always earn more from this method. Consider an example. You have zero balance in your account for first 9 days and then deposit a sum of Rs 20,000/- on the tenth day. You don’t make any withdrawal now for the entire month. In this case going by the old method you would have earned interest on Rs 20,000/- for full one month, but by the new method you’ll earn interest only for 20 days.**

**Conclusion**This is definitely a good move by RBI. Earlier if a customer withdrew the entire amount from his account on say 20

^{th}of the month, he earned zero interest even though the banks utilized his funds for 20 days. But now he’ll get interest for those 20 days, which is a fair process. But considering the inflation rates, saving bank accounts still remain a less lucrative method of generating wealth. I suggest you to read how RBI checks inflation using Repo, Reverse Repo, CRR and SLR rates.

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Great blog! The information you provide is quiet helpful, why I was not able to find it earlier. Anyways I’ve subscribed to your feeds, keep the good work up.

Glad that you found it useful.. now that you have found the blog hope to see you here more often 🙂

it is very nice plan for us

ok, i like this gameplan.

@ Repspace

Yeah i agree with you

@ Matt

That makes two of us 🙂

I am very Happy with new scheme for calculating interest for saving account. And you explain in such a nice manner that how banks will calculate the interest in scheme. I was waiting for this new scheme.

Thanks for sharing this wonderful information in a well managed way.

@ Jabber

Thanks for commenting. Glad that you found what you were looking for. Hope to see you here more often.

Great blog! The information you provide is quiet helpful for everybody, thanks for sharing this type of information.California swimming pools

It seems like you are great in doing calculations 😀

Thanks for sharing the news with us 🙂

Thanks Simran. Yeah I love financial stuff. Hope to see you here more often. 🙂

I'm very poor with financial statistics, this post suggests how much more we can do to get money working for us.

It's amazing how we rip ourselves off.

I,m just new to the world of having my own finances to a scale of looking after them, will check in again.

Good skill you have

@ James

Glad that you found it useful. I'll soon write about other finance related stuff. Hope you'll find that equally useful.

Very nicely explained article! Kudos to Anshul for bringing out the article in such a nice form. However, the statement that the customers will be earning more interest from their accounts than they did before, will not hold true for every case.

Let's take an example to illustrate. Suppose I deposited an amount of 20,000 on 10th of April 2010 and say I don't make any withdrawls throughout the month. Assuming that my balance at the begining of April month was NIL, I'll be entitled to Rs.57.53 in interest as per the old method while new method will give me just Rs.40.27 in interest.

@ Varun

A very nice observation Varun :). Thanks for that. I'll update the post with your observation.

I am very happy that all the Banks will give the interest according to this new scheme. When I saw this information in the news paper, I was daily check my account balance and think that why Banks not giving daily interest. Here I found that all the daily interest will give in the specific months at a time.

your article is very wonderful,looking forwand you next post what you said is so perfect,and give me great help,i am agree with you ,thank you very much

ok anshul that was scary not your post but your P.R.T[principle,rate of interest,time sum],i remember the childhood time when maths teacher use to give me sums of this chapter and much of the time i use to see cross mark gifted by the teacher because of wrong principle or wrong rate of interest taken and like that hahaha……

Hey man thnx yaar wanted to know about this

Hmmm nice info, I hope Indonesia have such benefit. Is it really works?

thank u sir……….thank u so much 4 such a nice site….

it becums very helpful for us…..

can u plez add some articles on fixed deposites…. thank u…

gud article. . . like for the post….