Money Talk India Finance Forum (MTIFF)

As per my knowledge it is a Simple interest but in a savings account the money will be rolling daily. What amount do bank consider as Principal amount for interest calculation.

What I had learnt in childhood was this:
For savings account minimum balance between 10th and 31st of the month is considered as principal for that month.

These days some banks follow the concept of Average Quarterly Balance...

Ok... SO it depends on the Bank...

Not sure of current scenario-I guess traditional banks (Syndicate, SBI, Canara etc) still follow old practice while ICICI, AXIS etc use AQB.

Will check this and update

Ok thanks....
I'll also try to find out......

ICICI Bank has confirmed that they are following traditional method:

"We request you to note that the savings bank account interest calculated monthly on the lowest balance available between 10 to 31st of the month and this interest amount is credited half yearly i:e, March & September of every year."

check this link

http://kingrooster.wordpress.com/2007/06/15/savings-account-how-is-interest-calculated/

Yes, that post confirms what I have already written..

Ok I understood the concept..... Thanks

I got the same reply from Citibank. Here is the response from them

"Dear Mr. Vishwas, This is with reference to your query dated April 10, 2008. We confirm that the interest rate applicable to your account is 3.5%. Interest is credited to your account half-yearly on the 1st of March and 1st of September i.e the interest amount is credited twice a year on 1st week of March for the period 1st September of the previous year to 28th February and 1st week of September for the period 1st March to 30th August. The interest is calculated on a monthly basis. Every month the interest accrues on the least balance between the 10th and the last day of the month. [ Interest = amount * rate of interest * number of days in a month divided by Total number of days in a year ] Interest is credited to your account half-yearly on the 1st of March and 1st of September. Please note that as per the standard banking norms, the Savings Account interest is calculated on the least balance maintained from the 10th to the last date of the month."

Good then.

many people run out of money by month end and their account balance nears 0...This way banks save lot of interest....