Straight talk By Sajjad Bazaz
I am a self employed person dealing in electronic goods. I am having a savings bank account in the bank for the last 15 years. I used to route most of my business transactions through this account. But recently, I was forced by the bank to open a current account and was told that business transactions are not allowed through savings bank account. Is it true?
(Zubair, Nai Basti, Islamabad)
Yes, it is true. As per the RBI directives Savings Bank Account (SB A/C) cannot be opened for business purposes and hence the account should be used to route transactions of only non-business / non-commercial nature. In the event of occurrence of such transactions or any other such transactions that may be construed as dubious or undesirable, the Bank reserves the right to unilaterally freeze operations in such accounts.
RBI guidelines also envisage that the balance in the savings bank account must adhere to the minimum quarterly average balance stipulation laid down by the Bank. Non-maintenance of such quarterly average balance will attract applicable penalty on a quarterly basis and on a date determined by the bank. If there is no transaction by the account holder in the account continuously for 24 months, the account automatically gets classified as a ‘dormant / inoperative account’ whereupon further debit transactions are not permitted in the ordinary course. A request for activation of the account has to be made by the customer and the customer is subject afresh to KYC norms (proof of address).
I am a savings bank account holder. I am not satisfied with the interest portion credited to my account. Even as I took up the matter with the concerned officer in the branch, every time I was told that the calculation of interest in savings account is totally different when compared to the formula applied in term deposits. Can you please guide me about the methodology of applying interest in savings account?
(Mohammad Amin Naqshbandi, Downtown Srinagar)
The formula of calculating the savings bank interest rate till March 31, 2010 used to give the S/B A/C holder the lowest rate possible, even though the account holder may have higher average balance. In these accounts, interest was paid on the minimum balance held between the 10th and 30th /31st of every month till March 31, 2010. As per these calculations, the effective rate of interest in savings bank account at 3.5% per annum as mandated by the government applicable to customers used to be about 2.90-2.95%. Surprisingly, the earnings on the deposit amount in the savings bank account were sometimes zero, not the 3.5% that the account holder assumed was getting.
Now, the methodology of applying interest rate in these accounts has changed from April 2010. Under the new methodology, interest shall be calculated on daily balance basis instead of calculating it on the lowest available balance between 11th and last date of a calendar month.
This change in calculation of interest paid on money kept in one's savings bank account will translate to the higher earnings for the depositor and in the new structure, this will be exactly 3.5%. This means that if a person used to earn around Rs 100 annually as interest income from his savings bank account, from this financial year, the amount will jump to Rs 116-Rs 118. Although the interest will be calculated on a daily basis, it will be credited to the account only at the end of each quarter.
(The views are of the author & not the institution he works for)
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Lastupdate on : Mon, 14 Jun 2010 21:30:00 Makkah time
Lastupdate on : Mon, 14 Jun 2010 18:30:00 GMT
Lastupdate on : Tue, 15 Jun 2010 00:00:00 IST
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