Savings a/c will earn daily interest

Savings bank account can earn you more interest now. The Reserve Bank of India (RBI) has issued a directive in its policy document that will change the way interest is paid on the minimum amount present in a savings bank account each day.At present, the interest (3.5 per cent per annum) is calculated on the minimum balance held in the account from the 10th of each month to the last day of that month. So, if a bank customer has Rs 1 lakh in his savings account one day and then Rs 100 another day, the minimum balance taken for calculation of interest in the period would be Rs 100.

But, from April 1, 2010, the interest paid on the savings account will be on the daily minimum balance. In other words, even the Rs 1 lakh balance in the savings account will earn the customer interest, even if it’s withdrawn later on. As per the new directive issued by RBI, only commercial banks will need to follow this new method of interest payment on savings accounts. Commercial banks include all banks other than co-operative ones.

This means that the money will start earning higher interest even as it remains liquid and safe.

Financial far sight

The ongoing financial crisis in the mature markets abroad has led to much introspection in the domain of policy-making and academia. Products must be made more transparent, with risk mitigation and prudential measures much better aligned. The quality and effectiveness of financial supervision must improve. It follows that the gaps and weaknesses in the prudential norms do need to be properly addressed, with proactive oversight and follow through. The crisis has much to do with the heavy issuance of credit-linked, mostly mortgage-backed, securities in the US, and subsequent large-scale default on the underlying assets, mainly housing.

The fact is that the push for increased sub-prime mortgages earlier this decade followed by securitisation of the receivables greatly compounded the problem.Of the trillions of dollars worth of asset-backed securities issued globally, roughly 60% had AAA credit-rating, the safest possible, according to Fitch Ratings. This is way, way too high. In sharp contrast, less than 1% of corporate bond issues are triple-A rated.

The structured products are particularly default prone in an economic downturn with substantial, correlated risks. It’s clear that the structured products were glaringly faulty. As we. in India moving for more reforms in the financial sector, which includes creating scope for new products, we need much more for skilled human resources and credible supervision . We do need to draw the right lessons from the crisis abroad and implement. Its the far sight that matters!!!!!!!!