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I had read that RBI had instructed banks to calculate interests on daily balances from 1st april 2010. Has this been implemented or shelved? I haven't noticed any difference in my interest credits.

  • Um, simple reality check: why don't you call your bank, and ask them? – Silver Dragon Jun 29 '11 at 17:24
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    I could. My experience with call centers in general has wired my brain to not consider this option as a natural first course of action. – ottodidakt Jun 30 '11 at 3:47
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Earlier the balance was arrived at as;
- Average of Minimum balance between 10th and 25th.
- So if you balance was 50,000 on 10th morning, and during the day it went to 10,000 the balance for the day considred was 10,000.
- This was done for 16 days and the average balance for 16 would be sum of balance for each day divided by 16.
- The interest was given for the month using this balance.

In the new ruling the minimum balance every day would be used. This means that earlier if you get a salary on 1st and make bill payments from 5th to 10th, in the earlier system you would not get more interest. In the current system for the first 5 days your balance would be more and hence you would get more interest.

The difference in calculation would just reult in around 10% more interest for most users and its not noticible.

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Yes, the measure was implemented.

Your interest credits used to be effected by the timing of your deposits and withdrawals. I think people who paid all their bills before the 10th, and then got paid on the 10th or just after, might notice a difference (might); but it's unlikely anyone else would.

This article discusses the change in the context of the basis point change - http://new.valueresearchonline.com/story/h2_storyview.asp?str=17308. It all sounds good on the surface, but with 7% inflation it's actually just mitigating your loss. Worth a read.

  • Earlier, if I moved in a large sum of money for just a couple of days, say from the 15th to the 19th of a month, I would get no credit as the interest was calculated on the minimum balance from 10th to 10th. As per new rules, I would get 3 days interest for the large sum of money. Correct? – ottodidakt Jun 30 '11 at 3:32
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    Between 10th and last day of the month was the period they took the average balance for. So you were getting a positive effect for depositing that money as it raised your average for the period. Now you get interest every day, so if you have three days of a high balance the higher interest is paid. You may be wondering if the change was worth it - for the regular individual investor it probably makes little noticeable difference. (I'm sure the banks would disagree.) – gef05 Jun 30 '11 at 12:38

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