#DecodeBanking > How is interest-rate on savings accounts calculated?

We’re here to make banking smarter, safer and simpler for you. And while we’re at it, here’s breaking down some basics for you.

Ever wondered how your savings account interest rate is calculated? The answer is here:
At present, your bank calculates interest rate on a daily basis on your closing amount. The interest accumulated is paid quarterly or half-yearly depending on your bank. Ideally, the RBI expects banks to credit savings bank interest rates on a quarterly basis.

So here’s the calculation. Assume (just assume :wink:) that your bank provides you with an interest rate of a whopping 7% above ₹1 Lakh in your savings account. (And below ₹1 Lakh, you’re getting an interest of 3.5%)

So, for a balance <= ₹1Lac, 3.5% interest rate is provided on the whole balance.
For a balance > ₹1 Lac, 3.5% interest rate is provided on the ₹1 Lac, and 7% interest rate is provided on the remaining balance.

Interest is calculated daily on EoD balance: (EoD Balance) * (3.5% or 7% interest) * (Number of days in quarter/365)

Interest is accrued on daily basis and is credited to the customer’s savings account at the end of the quarter.

Hi @Aswathy_Nambiar,

Could you please mention at what exact time is considered as EOD time for calculate the balance of that particular day?

Hi Alan,

End of Day here means midnight (IST) for Indian Banks.