What changed
The Government of India issued a corrigendum on December 8, 2005, modifying the earlier clarification on interest calculation for broken periods under SCSS. The revised formula replaces the previous method: interest for less than a quarter is now calculated as (Number of days in the period × interest for the quarter) / Total number of days in the quarter, instead of using yearly rate divided by 365/366.
What it means for you
Banks must update their systems to apply the new formula for broken period interest from the quarter ending December 31, 2005 onwards. This ensures consistent and accurate interest payments to senior citizens, aligning with the scheme's objective of regular income flow. Non-compliance may lead to customer complaints and regulatory scrutiny.
What you must do
- Immediately convey the revised formula to all designated branches handling SCSS accounts.
- Update internal systems and calculation modules to use the new formula for broken periods from December 31, 2005 quarter.
- Ensure interest is credited or paid on due dates to avoid delays and complaints.
- Acknowledge receipt of this circular to RBI as instructed.
Who it affects
State Bank of India and its associate banks, All public sector banks listed in the circular, ICICI Bank Ltd., Designated branches handling SCSS accounts, Senior citizen depositors under SCSS
What is the new formula for calculating interest for broken periods under SCSS?
For any period less than a quarter, interest is calculated as: (Number of days in the period × interest for the quarter) / Total number of days in the quarter.
From when is the revised formula applicable?
The revised formula applies from the quarter ending December 31, 2005 onwards.
Why is timely crediting of interest emphasized?
The scheme aims to provide regular income to senior citizens; delays defeat this objective and have led to complaints.