New Delhi: A month after RBI's advisory to banks on crediting interest at a shorter interval, state-owned Oriental Bank of Commerce (OBC) on Friday said it has started doing that on monthly basis for savings account holders.
"The Bank has now started crediting interest in savings bank account on monthly basis from April, 2016 against the existing half yearly basis," OBC said in a statement.
OBC claimed that it would be one of the first few lenders to provide this benefit to savings account holders.
Last month, RBI asked banks to pay interest on savings banks account on a quarterly basis or shorter duration. At present, the interest is credited to savings bank account on a half-yearly basis.
The interest rate on savings bank account is calculated on a daily basis since April 1, 2010.
While public sector banks offer 4 percent interest on savings deposit, private players offer as much as 6 percent.
In 2011, the central bank had decided to give freedom to commercial banks to fix savings bank deposit rates, the last bastion of the regulated interest-rate regime. While giving banks this freedom, RBI had said a uniform rate will have to be offered on deposits of up to Rs 1 lakh.
On higher amounts, banks are allowed to offer differential rates to depositors.
According to analysts, the lower the periodicity, the higher will be the benefit to savers. Banks, however, will have to shell out more to customers.
As per estimates, the lower periodicity of interest payment may put a burden of Rs 500 crore on banks.
Earlier, banks used to give the interest of 3.5 percent on savings accounts on the basis of the least deposit in an account between the 10th and the last day of each month.