How is bank interest calculated on savings accounts in India? Bank interest on savings accounts in India is usually calculated using the daily balance method and credited to your account on a quarterly basis. This method calculates interest based on the actual closing balance each day. 1. Daily Balance Method Since April 1, 2010, the Reserve Bank of India requires that interest on savings accounts be calculated on the daily closing balance. Formula: Interest for each day = (Daily Closing Balance × Annual Interest Rate) ÷ 365 The bank calculates interest for each day using this formula and then adds up the interest for all days in a quarter. The total interest is then credited to your account quarterly (every 3 months). 2. Example Suppose the bank offers an interest rate of 3.5% per annum. Your balance is: ₹50,000 from September 1 to September 15 ₹80,000 from September 16 to September 30 Calculation: For September 1 to 15: Interest = (50,000 × 3.5 ÷ 100) × (15 ÷ 365) = ₹71.92 For September 16 to 30: Interest = (80,000 × 3.5 ÷ 100) × (15 ÷ 365) = ₹115.07 Total interest for September = ₹71.92 + ₹115.07 = ₹186.99 This interest will be credited to your account at the end of the quarter. 3. Interest Rate Varies by Bank RBI does not fix the savings account interest rate. Most banks offer between 2.5% to 4% per annum. Some small finance banks may offer higher rates (up to 6% or 7%). 4. Quarterly Credit Interest is calculated daily but credited at least quarterly (every 3 months). Some banks may credit interest monthly in special cases. Summary: Interest is calculated daily on your closing balance. Formula: Interest = (Balance × Annual Rate) ÷ 365 (per day). Interest is credited quarterly to your account. Higher daily balances earn higher interest.