Rules regarding payment and calculation of interest on time deposits
Interest accrued on a time deposit, would ordinarily be paid, only on maturity. However, at the request of the depositor, interest on deposits of -12- months and over, can be paid before maturity on the following basis:-
Monthly, quarterly or half yearly interest on completion of the month/quarter/half year calculated from the date of deposit or end of each calendar month / quarter / half year, whichever is later.
Interest payable under the Monthly Income Plan is the discounted value of interest payable in terms of IBA code for Banking practice. i.e. interest received under Monthly Income Plan will be less than simple interest.
For calculation of interest on term deposits for periods less than -12- months, the following methodology would be adopted:-
“In all cases of domestic term deposits (Period of deposit less than a year) where the terminal quarter is incomplete, interest will be calculated for complete quarter and for the actual number of days, reckoning the year 365/366 days, i.e. the calculation of interest on such deposits should be in order of completed quarters and days.”
Accordingly interest will be paid as under.
- Deposit placed for period less than 90 days /3 months, interest will be calculated for the actual number of days on the basis of 365/366 days in a year.
- Deposit placed for more than 90 days /3 months to less than 180 days /6 months interest will be calculated first for completed quarters and thereafter for actual number of days if terminal quarter is incomplete reckoning the year at 365/366 days. ( Total interest= Interest of quarter+ interest for days i.e. simple interest)
- Deposit placed for more than 181 days /six months but less than one year interest will be calculated first for completed quarters and for terminal incomplete quarter, actual number of days reckoning the year at 365/366 days. Interest will be calculated and compounded at quarterly rests. ( compounding will be done if deposit is for more than 2 quarters period.)
Method of calculation of interest adopted for Term deposit (period of deposit more than a year ) w.e.f. 01.03.2012
In all cases of domestic term deposits (period of deposit more than a year) where the terminal quarter is incomplete, interest will be calculated for the actual number of days, reckoning the year 365/366 days viz. the calculation of interest on such deposits will be in order of completed quarters and days.