WELCOME MOVE

This decision of the Reserve Bank of India in issuing a policy guideline to Banks to shift to daily interest calculation on savings accounts is a welcome move.This will help crores of small depositors across the country.At present, interest on savings bank accounts is calculated on the minimum balances held in the accounts during the period from the 10th day to the last day of each calendar month. The feed back received from banks suggested that interest on savings bank accounts may be calculated either on the minimum balances in the deposit accounts during the period from the first to the lastday of each calendar month or on a daily product basis. The matter was referred to the IBA, which was of the view that payment of interest on a daily product basis would be feasible only when computerization in banks is completed. In view of the present satisfactory level of computerisation incommercial bank branches,RBI has taken this bold step. However,depositors have to wait till march next year to avail this benefit.

The profitability of the Banks may be affected in the short term but in the long run, Banks shall stand to benefit as more idle money will start flowing towards savings accounts, which will increase the much needed liquidity and lendable resources,which will ultimately results in better profitability for Banks.