Yes you heard it right and Thanks to RBI who changed it all from this financial year bringing joy to the Savings Bank account. Bottom line the interest will be given to you based on your daily balance.
Many of us do not know that Banks used to calculate interest based on the lowest balance of your month or specifically the minimum balance that was available after 10th of every month. So you might have 50K on the day you get salary but by the end of the month, you will not have more than 15K left in your account on which 3.5% interest was calculated.
According to this notification of RBI issued on 24th of April 2009, here is the complete scenario
At present, interest on savings bank accounts is calculated on the minimum balances held in the accounts during the period from the 10th day to the last day of each calendar month.
Several banks have suggested that interest on savings bank accounts may be calculated either on the minimum balances in the deposit accounts during the period from the first to the last day of each calendar month or on a daily product basis.
The matter was referred to the IBA, which was of the view that payment of interest on a daily product basis would be feasible only when computerisation in banks is completed. In view of the present satisfactory level of computerisation in commercial bank branches, it is proposed that payment of interest on savings bank accounts by scheduled commercial banks (SCBs) would be calculated on a daily product basis with effect from April 1, 2010.