New Savings Bank account rules from tomorrow

The new savings account rules come into effect from tomorrow-- where instead of the interest being paid on the basis of the minimum amount in your account from10 to the 30 of the month, it will now be on a daily basis because of which the amount of interest that you get will be almost double ( read my previous post on this --"Free interest! Your money doubled!"  

So what should we do to make use of this facility?

1. Ensure that you pay out your money as per the due dates and not before. This will ensure that the money is in your account for as long as possible
2. When paying for credit card bills etc, Use electronic means of transferring money instead of cheques when paying for credit cards etc.

3. USE cheques when paying someone money on account of payment-- eg buying furniture, paying electricity bills, etc ( that is in places where you can get a receipt stamped date , so if the person / company delays banking the cheque , you get the benefit for another day)-- keep the "Float" with you!

4. If you need to get money from someone-- get an electronic transfer if possible , else bank the cheque as soon as you can.. DONT WAIT-- you lose 0.096% daily!

Simple tips... applicable from 1st April... Double your money-- Be smart.


Happy Happy Investing :)

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Free interest,.... your money doubled!

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)
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Happy investing!