Abstract
Savings account is perhaps the most commonly used account and the most basic account. Generally, money is kept in the bank as deposit and the savings account holder on the money deposited earns interest. The earnings depend on the APR or the Annual Percentage Rate.
Statistics prove that as of March 31 st , 2005 deposit amount for saving banks was found to be Rs 472,147 crore. This constituted 26% of the overall deposits of commercial banks. In case of savings deposit amount pertaining to individual account holders, the amount was found to be Rs 364,869 crore. This constituted 77% of total deposits of savings banks. 3.5% per annum was the compensated or remunerated rate for the deposit of savings banks. Studies also reveal that the effective rate was an approximation of 2.8%.
Method of calculating rate of interest on savings account:
The Savings account bank rate of interest is calculated in such a manner that part of the money in the savings account is not paid any interest. In fact, the rate of interest is applicable on the deposited amount from the 10 th of every month to the last day of the month. These funds are borrowed by an individual at a higher rate of interest, from where the main profits of the banks come.
Few believe that the interest of depositors is not prioritized much. This notion has been further strengthened by the example that while interest earned from the savings account (at the rate of 3.5%) is taxable, whereas, the income earned from various financial instruments like mutual funds as well as equities do not attract income tax.