Daily interest

We are all aware that the money kept in saving bank account attracts an interest of 3% annually, come April 1st and we will be given interest on a daily basis for the money lying in our account. The new directive by RBI to the banks referred as “daily interest “

Till date bank use to consider interest for a particular month based on the closing balance on or before 10th of that month. For example say I have 50,000 bucks in my account on 1st of march and I withdrawn 45,000 before 10th of march, my closing balance on 10th march was 5000 so I’m eligible for interest of 3% on 5000 rupees only and not on the 45000.

The new directive will make one entitle to get interest for the money on a daily basis. But this will automatically push up the cost of funds of banks, depending on the proportion of current accounts and savings accounts (CASA) they hold. So a direct effect of this would be the rate of interest on saving bank will go down or the cost of borrowing will go up, I believe the days are not far away when one will be charged for putting his money with the banks.