RBI allows banks to pay interest at shorter intervals

RBI allows banks to pay interest at shorter intervals
The Reserve bank of India has allowed banks to revise the periodicity of interest payments on the back of which savings bank account and term deposit holders can now earn interest at shorter intervals, said the media report.

"As all commercial banks are now on core banking platforms, it has been decided to give banks the option to pay interest on savings deposits and term deposits at intervals shorter than quarterly intervals," RBI Governor Raghuram Rajan said in its Second Quarter Review of Monetary Policy2013-14.

Presently, banks are required to pay interest on savings and term deposits at quarterly or longer intervals.

While giving banks this freedom, the RBI had said a uniform rate will have to be offered on deposits of up to Rs 1 lakh. On higher amounts, banks are allowed to offer differential rates to depositors.

The savings deposit rate for most banks is 4 per cent per annum, while in some cases, it is as high as 7 per cent. The interest rate on savings bank accounts is calculated on a daily basis. Term deposit rates are 8-9 per cent for tenures of one year and above.

Dion Global Solutions Ltd

Read more about: rbi, interest rates
Story first published: Wednesday, October 30, 2013, 9:10 [IST]
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