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How to Calculate Savings Account Interest Rate?
Posted on Monday, December 12th, 2022 | By IndusInd Bank
In today’s new-age world, nobody wants to settle for anything less than everything. Earning individuals are looking for a secure way to park their funds, with both, ease of access and interest on their money. This is where savings accounts come into play. A savings account offers cash withdrawal, online payment and transactions, payment via cheque & debit card, and much more – all while you are earning interest on the money in your account.
How is the savings account interest rate calculated?
Savings bank account interest rate is calculated on a daily basis in accordance with the Reserve Bank of India directives. The interest rate is based on the daily maintained closing balance in your savings account. The rate of interest on savings account earned by each customer varies basis the actual balance maintained in the account, and the rate offered by the selected bank. At IndusInd Bank, we offer attractive interest rates on our best-in-class savings accounts.
Savings interest rate calculation explained
Rohit opened a savings account with his bank at an interest rate of 4 per cent, and deposited Rs. 1,00,000. Rohit earns interest on the closing balance in the savings account at the end of each day. After 15 days, he withdrew Rs. 20,000. A week later, he deposited Rs. 15,000 in his account. He made no further transactions for the rest of the month.
Let us tabulate the data to see the closing balance in Rohit’s savings account for a period of 30 days.
| Day of the month | Deposit | Withdrawal | Closing balance | Interest rate on savings account |
| Day 1 | – | – | Rs. 1,00,000 | 4% |
| Day 15 | – | Rs. 20,000 | Rs. 80,000 | 4% |
| Day 22 | Rs. 15,000 | – | Rs. 95,000 | 4% |
| Day 30 | – | – | Rs. 95,000 | 4% |
From Day 1 to Day 14, Rohit’s closing balance was Rs. 1,00,000. From Day 15 to Day 21 – for a period of 7 days – his closing balance was Rs. 80,000. From there on, his closing balance was Rs. 95,000. Let us now calculate the interest earned on savings account by Rohit using the formula:
Interest on savings account = Daily balance x Rate of interest x (No. of days/365)
| Number of days | Closing balance | Interest earned |
| 14 Days | Rs. 1,00,000 | 1,00,000 x 4/100 x (14/365) = 153.42 |
| 7 Days | Rs. 80,000 | 80,000 x 4/100 x (7/365) = 61.36 |
| 9 Days | Rs. 95,000 | 95,000 x 4/100 x (9/365) = 93.69 |
| Total | Rs. 308.47 |
When is the interest amount credited?
The interest amount on a savings account is either credited quarterly, or on a half-yearly basis. The RBI directives encourage the banks to credit the interest amount at the end of every quarter so as to incentivize the general public in investing. At IndusInd Bank, the interest is paid in March, June, September, and December.
A Savings Account is one of the most reliable banking products. It offers a safe way to park your funds, earn regular interest and easily access the money for transactions. IndusInd Bank Savings Accounts also offer seamless and secure fund transfer options such as UPI & Net banking. Enjoy special value-added services and benefits such as cashbacks, discounts, rewards on shopping and save more! Click here to apply for a savings account now.
Disclaimer: The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. Hence, you are advised to consult your financial advisor before making any financial decision. IndusInd Bank Limited (IBL) does not influence the views of the author in any way. IBL and the author shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information.
