Prosperous New Fiscal Year 2010-11

There is a reason to be happy this new fiscal year, 2010-11. All of us (with a savings account) will earn more. Although the savings account deposit interest rate remains unchanged at 3.5%, your bank will pay you more than what it did for so many years. (In other words, banks did not pay what they should have so many years)

Until today, banks paid us 3.5% interest on the “lowest account balance between 10th and 31st of every month”. Lets say, one had Rs 1,00,000 on the 10th of the month & withdrew Rs 90,000 on 29th. In this case, bank would calculate interest for the month only on Rs 10,000, though you had Rs 1,00,000 almost throughout the month.

From tomorrow – 1st April, 2010, banks will calculate interest on the daily balance. Banks will continue to credit the interest amount quarterly or half yearly but the calculation will be based on the daily balance. Thanks to RBI

Another interesting aspect – In the example above, if you transferred Rs 90,000 to a friend on 29th, the bank did not have to pay interest on the Rs 90,000 to either you or your friend since the “lowest account balance” in both your accounts will not account for the 90k. In the new state of affairs, banks will be mandated to pay the interest in one of the accounts.

Coupled with the new income tax slabs for this year, you save on tax and earn more from banks! Guaranteed prosperous new fiscal year.