Savings Account: Did you know that banks give interest on savings accounts? How to calculate?

Savings Account: Bank savings accounts do not have time restriction or maturity period. As long as you keep money in your account, you will continue to earn interest. But here is one thing to remember. Most banks require you to maintain a minimum balance (minimum amount of cash) in the savings account. It is mandatory. Otherwise additional charges will apply. There is also a possibility that the bank account will be closed due to inability to pay these.

But many people may not know that banks charge interest on savings accounts like fixed deposits. Banks decide the interest rates depending on the deposit amount. It also varies from bank to bank. It means less interest in one and more interest in one.

For example, if you look at ICICI and HDFC banks, they offer 3 percent interest if the cash in the savings account is less than Rs.50 lakh, and 3.5 percent interest if it is more than Rs.50 lakh.
Now let us know how banks usually charge interest on savings accounts. As per Reserve Bank of India (RBI) guidelines.. Banks calculate interest based on your closing balance on a daily basis. And depending on the bank policy, and also depending on the type of your bank savings account, interest will be deposited at the rate of 3 months or 6 months. This also varies from bank to bank. But RBI has directed banks and finance companies to deposit interest every 3 months in customers’ accounts.

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How to calculate?

For example, suppose you have Rs.3 lakhs in your account daily. If you want to pay 4 percent annual interest on it.. To calculate monthly interest on it, you will know this formula PTR/100×365. Here P stands for 3 Lakhs. T means time is monthly so 30 days. R means the rate of interest is 4 percent. In this calculation 3 lakhs X 30 X (4/100) / 365 = Rs. 986. That means if you have cash of Rs.3 lakh, interest will accrue at the rate of Rs.986 per month. Banks deposit it once every 3 months and 6 months. But the thing to remember here is that the interest rate depends on the balance you maintain in the account on a daily basis.

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