FD rate calculation: How is fixed deposit interest rate calculated in a leap year There are 29 days in February this year
Ever wondered how a fixed deposit interest rate is calculated in a leap year? Will you get a higher interest rate in such a year? Leap years are those that occur every four years and have 366 days as compared to 365. There are 29 days in February this year.Here is a quick compilation of how banks calculate interest rate on fixed deposit in a leap year.
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Bank of Baroda
“In all cases of Domestic Term Deposits ( period of deposit more than a year) where the terminal quarter is incomplete, interest should be calculated for complete quarter and the actual number of days, reckoning the year 365/366 days viz the calculation of interest on such deposits should be in order of completed quarters and days.”
Here are some points to note as per Bank of Baroda
For Deposits of 2 Quarters and above, interest is calculated in quarterly compounded for complete quarters and where the terminal quarter incomplete, interest is calculated proportionately for the actual no of days reckoning the year 365/366 days.The Maturity Amount mentioned in the receipt is calculated without giving TDS effect. While calculating interest for half year(Quarterly compounded), the interest calculated for previous half year (quarterly compounded) minus TDS will be added to principal amount for calculating interest for current Half Year.For Short Deposits of less than 2 quarters but more than 1 quarter simple interest will be paid for complete quarter and plus interest for remaining days reckoning the year 365-366 days( without compound effect).For short deposits of less than one quarter interest is calculated proportionately for actual number for days reckoning the year 365-366 days.Jana Small Finance Bank
As per the bank website, “The interest is computed based on the actual number of days in a year i.e. 365 days for a non-leap year and366 days for a leap year. The tenor of Deposit is calculated in number of days.”
Au Small Finance Bank
“The Bank computes interest based on the actual number of months & days in a year. In case, the deposit is spread over a leap and a non-leap year, the interest is calculated based on the number of days i.e. 366 days in a leap year & 365 days in a non-leap year. The period of Fixed Deposit is calculated in number of months & days,” the website states.
IDFC FIRST Bank
According to the IDFC FIRST Bank website, “The Interest calculated is rounded up to the nearest rupee and calculation of interest is basis 365 days for the period of fixed deposit falling in a non-leap (financial) year and 366 days for the period of fixed deposit falling in a leap (financial) year.”
HDFC Bank
The real number of days in a year is the basis on which HDFC Bank calculate interest. According to the HDFC Bank website, “We compute interest based on the actual number of days in a year. In case, the deposit is spread over a leap and a non-leap year, the interest is calculated based on the number of days i.e. , 366 days in a leap year & 365 days in a non leap year.”
Illustration:
No of days in the year 365
FD principal – 10,0000Rate of Interest – 4.5%FD tenure – 180 daysInterest paid – 100000*180*4.5%/365 = 2219.17No. of days in the year 366 (Leap Year)
FD principal - 100000Rate of Interest – 4.5%FD tenure – 180 days (Including leap month)Interest paid – 100000*180*4.5%/366 = 2213,11.Connect with Experts - Wealth creation made easy
This story originally appeared on: India Times - Author:Faqs of Insurances
