Question

How does bank give interest on savings account ?

• A. Quarterly
• B. Monthly
• C. Yearly
• D. Half-yearly

Hint:

Remember the distinction: interest on a savings account is \textit{calculated} daily but \textit{paid} (credited) quarterly. This is a common point of confusion.

Answer 1

The Correct Option is A

Step 1: Understanding the Concept:
The question asks about the frequency at which banks credit or pay interest to a savings account.
Step 2: Detailed Explanation:
As per the regulations of the Reserve Bank of India (RBI), the interest on a savings bank account must be calculated on the daily closing balance. However, the crediting (payment) of this accumulated interest into the account is done at specified intervals.
For most banks in India, this interval is quarterly. The interest is typically credited at the end of each quarter of the financial year (i.e., end of June, September, December, and March). While banks have the option to pay it more frequently (e.g., monthly), the standard and most common practice is quarterly.
Step 3: Final Answer:
Banks generally give interest on savings accounts on a quarterly basis.