Quick Edit | A 3.5% return, finally

Quick Edit | A 3.5% return, finally
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First Published: Thu, Apr 01 2010. 12 37 AM IST
Updated: Thu, Apr 01 2010. 12 37 AM IST
It’s not something that will swell your coffers instantly. But be sure that you will have more in your bank account than before.
From Thursday, banks will pay interest on your savings deposits on a daily average balance instead of the minimum balance on a monthly basis. The latter was a piece of banking skulduggery. The trick lay in the dates on which the interest was computed. Depositors would always assume that they would earn the 3.5% due based on what they had in their account, little realizing that the period of calculating the interest made a neat dent in what was due to them. Part of the problem was that of information asymmetry: consumers not knowing how banks made this calculation.
Another part of the story, that of resistance by banks to change, was that they rode to profitability at the expense of millions of small depositors. Now, banks will have to work harder to make profits instead of using a dubious formula to earn money.
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First Published: Thu, Apr 01 2010. 12 37 AM IST