Thanks to the new policy by the Reserve Bank of India, we will be getting higher returns on our cash that is lying in our account-- actually by a big degree...
When Banks said that the money in our accounts gained an interest of 3.5%-- it was actually not true. The rule was that the 3.5% pa interest which is 0.29% per month was on the MINIMUM amount of the cash that was in the bank from the 10th to the 30th of the month.
So if you made any payment from your bank account anytime in the middle of the month-- you would not get any interest on the money for the days you had it in the bank.
Lets take an example:
Jan 1 10,000
Jan 7 10,000
Jan 12 12,000
Jan 18 8,000
Jan 25 20,000
Jan 29 5,000
So if you look at your passbook in the above example, you would have gotten an interest of 0.29% on 5000 for the month which is 14.58 Rs.
However going forward from the 1st of April, 2010, the RBI has told banks to give interest on the amount that is there in the bank on a daily basis.
If i calculate using the same example on the interest earned on a daily basis -- we would get an interest of Rs 32.41/- which is 2.2 times the amount of interest earlier!!!
[what you need to do to calculate this is as follows
Daily Interest= 3.65%/ 365= 0.009589 %
No of days in the bank -- taking the above example
Date Amount No of days
Jan 1 10,000 7
Jan 7 10,000 5
Jan 12 12,000 6
Jan 18 8,000 7
Jan 25 20,000 4
Jan 29 5,000 2
Now the way to calculate it is
Interest earned = (10000* 7+ 10000* 5+ 12000*6+ 8000*7+20000*4+ 5000*2)* 0.009589 %
So definately this is going to get you more money earned due to the new way of calculation of interest.... 2.2 times in the above example...
Do I hear a standing ovation for the RBI?
of course this doesnt mean in anyway that you should have more money in your savings account... 3.5% measely returns are definately not worth it-- especially when the inflation adjusted returns is negative!! ( click here to read what this means)
We should be having only the necessary amount lying as idle funds or cash in the bank ( read how to calculate your emergency funds here)
If you liked the article-- please do not forget to click on the link to subscribe!
Happy investing!
When Banks said that the money in our accounts gained an interest of 3.5%-- it was actually not true. The rule was that the 3.5% pa interest which is 0.29% per month was on the MINIMUM amount of the cash that was in the bank from the 10th to the 30th of the month.
So if you made any payment from your bank account anytime in the middle of the month-- you would not get any interest on the money for the days you had it in the bank.
Lets take an example:
Jan 1 10,000
Jan 7 10,000
Jan 12 12,000
Jan 18 8,000
Jan 25 20,000
Jan 29 5,000
So if you look at your passbook in the above example, you would have gotten an interest of 0.29% on 5000 for the month which is 14.58 Rs.
However going forward from the 1st of April, 2010, the RBI has told banks to give interest on the amount that is there in the bank on a daily basis.[what you need to do to calculate this is as follows
Daily Interest= 3.65%/ 365= 0.009589 %
No of days in the bank -- taking the above example
Date Amount No of days
Jan 1 10,000 7
Jan 7 10,000 5
Jan 12 12,000 6
Jan 18 8,000 7
Jan 25 20,000 4
Jan 29 5,000 2
Now the way to calculate it is
Interest earned = (10000* 7+ 10000* 5+ 12000*6+ 8000*7+20000*4+ 5000*2)* 0.009589 %
So definately this is going to get you more money earned due to the new way of calculation of interest.... 2.2 times in the above example...
Do I hear a standing ovation for the RBI?
of course this doesnt mean in anyway that you should have more money in your savings account... 3.5% measely returns are definately not worth it-- especially when the inflation adjusted returns is negative!! ( click here to read what this means)
We should be having only the necessary amount lying as idle funds or cash in the bank ( read how to calculate your emergency funds here)
If you liked the article-- please do not forget to click on the link to subscribe!
Happy investing!
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