Quarterly interest means depositors lose Rs 2,500 crore every year MUMBAI: Depositors are losing close to Rs 2,500 crore every year because of Indian banks applying interest on deposits every quarter instead of every month, according to a report by the Indian Institute of Technology, Mumbai. This is in contrast to loans where interest is applied on a monthly basis. To study the impact of this discrimination, one needs to compare the interest liability on a Rs 1 lakh education loan at the end of the year compared to earnings from a fixed deposit assuming interest on both was 10%. While the interest earned on the FD would be around Rs 10,381, the interest liability on the loan would be Rs 10,471. Such comparison is only possible in education loans where there is no repayment in the first year. At present, the Reserve Bank of India (RBI) mandates banks to apply interest on deposits at quarterly or larger intervals. Banks also calculate interests accrued on a fortnightly basis but only for reporting to RBI.
Posted on: Fri, 05 Jul 2013 06:45:03 +0000