The Reserve Bank of India on 29 October 2013 allowed the commercial banks to revise the periodicity of interest payments thus enabling savings bank account and term deposit holders to earn interest at shorter intervals.
The Second Quarter Review of Monetary Policy 2013-14 released by the RBI Governor Raghuram Rajan revealed that as all commercial banks are now on core banking platforms, it has been decided to give banks the option to pay interest on savings deposits and term deposits at intervals shorter than quarterly intervals. Presently, banks are required to pay interest on savings and term deposits at quarterly or longer intervals.
The savings deposit rate for most banks is 4 per cent per annum, while in some cases, it is as high as 7 percent. The interest rate on savings bank accounts is calculated on a daily basis. Term deposit rates are 8-9 per cent for tenures of one year and above.
The Reserve Bank of India gave freedom to commercial banks to fix savings bank deposit rates in 2011. While giving banks this freedom, the RBI kept one condition that a uniform rate will have to be offered on deposits of up to 1 lakh Rupees, on higher amounts banks are allowed to offer differential rates to depositors.