The move will enable saving bank account holders to earn better interest rates since banks currently calculate interest on these accounts on the lowest available balance, from 11th and the last date of a month.
“We advise that payment of interest on savings accounts may be made by banks on a daily product basis with effect from April 1,” RBI said in a notification, which also asks banks to ensure a smooth transition and work out the modalities in this regard. Earlier banks had urged RBI to postpone the move. “We requested them to either reduce the savings rate or postpone the implementation. It will affect our margins and profit,” Indian Banks Association chairman M V Nair had said.
Currently, interest rates on saving accounts are de-regulated, barring up to Rs 2 lakh. The RBI only administers interest rates on saving bank deposits up to Rs 2 lakh, and for deposits above this amount, banks are free to give any interest rates.