With the central bank of the country mandating all banks to compute interest on savings accounts on a daily basis, account-holders will reap better rewards from their deposits
The credit side of your passbook will soon show much healthier figures, instead of the measly amount your savings deposits earned until now. The Reserve Bank of India’s (RBI) recent directive to banks to start calculating interest rates on such accounts on a daily basis from 1st April will bring cheer to millions of savings account-holders in the country.
Under the new system, banks will now calculate interest on your savings account on daily balances, replacing the current archaic system where banks compute interest on the lowest available balance held between the tenth and the last day of the month.
The current system is no less than a rip-off for the common man, as banks have become used to getting low-cost funds at the cost of hapless savings account holders. This is how it used to work: Suppose you held Rs20,000 in your savings account at the end of the 10th day of a month, subsequently withdrawing Rs15,000 at the end of the month, you would only earn interest on the lowest balance in your account for the entire month—in this case, Rs5,000. As such, your account will be credited with Rs175.
However, under the new system, even if you have withdrawn Rs15,000 at the end of the month, you will get interest not only on your account balance on the last day of the month (Rs5,000), but also on the daily balance held for the first 29 days of the month. In this case, the interest will add up to Rs682.50.
For banks, though, this will obviously raise the cost of funding. Banks with higher proportion of CASA (current account and savings account) deposits in their funding sources will get hurt the most. Margins will get squeezed unless the RBI decides to act on the bankers’ call to reduce interest rates on savings accounts. This is highly unlikely, however, as it would defeat the very purpose of RBI’s depositor-friendly stance in this matter.
Speaking about the impact of this move on banks, SSN Murthy, senior vice president, Indian Banks’ Association (IBA) said, “The interest payment will now be high for banks. We are asking for some reduction in interest rate. We are trying to either continue the old procedure or are asking for a reduction to 2.5%.” He also added that it would likely result in a rise in liquidity for banks as people will put money into savings accounts to get the benefit of more interest payout.
Although the central bank had proposed this move two years back, banks had asked it to postpone the same citing unfeasibility due to lack of computerisation. Now that majority of the banks are well-equipped with computers, RBI has finally asked banks to implement the decision from 1st April. Customers are unlikely to be fooled this April Fool’s day.
However, banks may still try to circumvent the new regulations by attempting to reduce the interest rate chargeable on daily basis through some subterfuge. In such a scenario, depositors may still find themselves short-changed, unless the RBI takes a hard stand on the matter.
GIPL has won the arbitration award (Rs161.50 million) against NHAI for refusal to pay early completion bonus for two of its road projects
Gammon Infrastructure Projects Ltd (GIPL) has won the arbitration award for payment of early bonus from the National Highway Authority of India (NHAI) for two of its road projects. NHAI is expected to pay a bonus to GIPL for the early completion of two projects—Rajahmundry Expressway and Andhra Expressway.
“The arbitration has been unanimously decided in our favour,” said Parvez Umrigar, managing director, GIPL. While the NHAI has been struggling to fast-track the completion of its road projects, two of GIPL’s road projects were stuck in the arbitration process, awaiting realisation of the bonus amount for early completion.
The payment for these projects commissioned in 2004, ran into a dispute following NHAI’s refusal to pay the bonus amount.
The Rajahmundry Expressway project involved widening and strengthening of the 53-km stretch between Dharmavaram and Tuni in Andhra Pradesh on National Highway (NH-5), connecting Chennai and Kolkata.
GIPL had achieved the commercial operations date (COD) for this project on 20 September 2004, seventy days ahead of schedule. For this project, GIPL expected a bonus of Rs115 million from NHAI for early completion.
The Andhra Expressway project involved widening and strengthening of the 47-km stretch between Dharmavaram and Tuni in Andhra Pradesh on NH-5.
The project achieved COD on 30 October 2004, thirty days ahead of schedule. The bonus expected from NHAI for this project was Rs46.50 million.
Though the arbitration order has been unanimously decided in GIPL’s favour, NHAI has been given a period of 90 to 120 days to honour the order. “It now depends on them (NHAI) whether to abide by it or challenge it in a court,” added Mr Umrigar. The case has been under consideration since three years and the arbitration order has also spelt out a penalty of interest to be paid.
Following Reliance MediaWorks' open offer to buy 52.48% stake, another ADA group company has increased its stake in Fame India to 12.14% from 6%
Reliance Capital Partners has hiked its stake to 12.14% in Fame India, a day after another Anil Dhirubhai Ambani Group (ADAG) company Reliance MediaWorks announced an open offer for a majority stake in the theatre chain, reports PTI.
Fame India in a disclosure to the National Stock Exchange (NSE) on Monday said that Reliance Capital Partners has acquired 21.28 lakh shares, representing 6.12% stake, in Fame between 6th and 19th February 2010.
Pursuant to the purchase, Reliance Capital Partners' stake in Fame India has increased to 12.14%, up from 6.02% earlier.
Yesterday, ADAG company Reliance MediaWorks announced an open offer to acquire 2.16 crore shares, or 52.48% stake, in Fame at Rs83.40 per share, countering an existing takeover bid by rival Inox Leisure.
Inox Leisure had recently signed an agreement to acquire 43.28% promoters' stake in Fame India for Rs66.48 crore and earlier this month made an open offer to buy another 20% stake at Rs51 per share.
Reliance MediaWorks had said that it would seek action against Fame for selling promoters' stake in the theatre chain to Inox at a price much lower than it had offered earlier. If the open offer gets fully subscribed, ADAG will hold 64.64% stake in Fame India.