How many of us have actually checked our savings account to see how much interest gets credited into our account for the deposits we make? And how many of us know the way interest is calculated and credited into our account?
As per RBI’s guidelines interest are calculated on daily basis. To understand how interest is calculated let us discuss one example. Suppose you have deposited 500000 Rs in your saving account on April 1st and bank give you an interest of 4% per annum. To calculate interest for April month, bank will use following formula
Monthly Interest = Daily Balance * (Number of days) * Interest / (Days in the year)
Monthly Interest = 500000 * 30 * (4/100) / 365 = Rs. 1644
You will get 1644 Rs as interest for the month of April.
Interest rate in India.
Interest rate for saving account varies from 4% to 7% per annum. To check latest interest rate for different banks click here. You can choose saving account of any bank depending upon your requirements. In the example discussed above we use minimum interest of 4% per annum.
Saving Account Interest Rate Calculator
A Savings Account Interest Rate Calculator will let you find out the interest that you will get from a savings account. In a Savings Account Interest Rate Calculator, you will be required to enter information like average balance and interest rate offered by the bank. You will also be required to select if the interest will be credit on a monthly, quarterly, half yearly or yearly basis. The calculator will output the interest that you will get for the daily balance and the savings account interest rate. To calculate your interest click here.
How often interest paid on saving account
As you know how interest is calculated, you may wonder when interest is deposited in saving account. As per RBI, Bank should deposit interest to saving account of a holder every quarterly. So we can expect an interest coming in Jan, April, July and Oct of every year. Some banks may give interest on monthly basis as well.
In the example discussed above, interest of RS 1644 is calculated for one month. If you maintain balance of RS 500000 for quarter, you can see a deposit of 4932 credited in your saving account after end of quarter.
Interest calculation on different types of saving accounts
Saving account have different types of accounts depending upon benefits such as salary account, zero amount saving account, saving account for women etc. Bank will not provide any type of interest on salary account but bank provides some other benefits. Apart from salary account, interest is calculated with same formula and deposited every quarterly in your account. Difference between different types of saving account is that for every type interest rate is different but calculation part is same.
Interest calculation for current account.
Current bank account is opened by businessmen who have a higher number of regular transactions with the bank and bank gives overdraft limit for current account holder.
Savings accounts earn interest at a rate of around 4%, while there is no such earning from a Current Account. A Current Account is actually a no interest-bearing deposit account.
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Disclaimer: Actual interest calculation and amount credited will be depend on bank.