What changed
Previously, interest on savings deposits was calculated on the minimum balance between the 10th and last day of each month. RBI has now mandated that interest be calculated on the daily product basis, effective April 1, 2010.
What it means for you
This change benefits depositors by crediting interest for every day's balance, increasing returns on savings accounts. For RRBs, it requires system upgrades and process changes to compute interest daily, potentially impacting net interest margins slightly.
What you must do
- Update core banking systems to compute interest on daily product basis by April 1, 2010.
- Train staff on the revised calculation method and communicate changes to customers.
- Review and adjust interest rate pricing and fee structures to manage margin impact.
- Ensure compliance with the directive and submit transition plan to RBI if required.
Who it affects
Regional Rural Banks, Savings account customers of RRBs, RBI's Rural Planning and Credit Department
What is the daily product basis for savings interest?
Interest is calculated on the actual daily balance in the account, summed over the month, instead of the earlier method based on minimum balance between 10th and last day.
When does this change take effect?
The revised procedure is effective from April 1, 2010, as per the RBI circular dated September 24, 2009.
Does this apply to all savings accounts in RRBs?
Yes, the directive applies to all savings bank accounts maintained by Regional Rural Banks.