Business

How are fixed deposit rates calculated in a leap year? Here’s how banks handle the extra day | Business – Times of India

February 29, 2024
Saqafy Times

FD rate calculation: Have you ever wondered how banks calculate fixed deposit interest rates in a leap year? Leap years happen every four years and consist of 366 days, unlike the usual 365. This year, February has 29 days. With an extra day in February, leap years bring about a subtle change in the way interest accrues on your fixed deposits. Here’s how some prominent banks handle the calculation process during leap years.
Bank of Baroda
ET noted that, for Domestic Term Deposits lasting more than a year, if the final quarter is incomplete, Bank of Baroda calculates interest for the complete quarter and actual days, considering the year as 365/366 days.Interest is compounded quarterly for completed quarters, while the incomplete terminal quarter incurs proportional interest for the actual days.
Here are some key points from Bank of Baroda’s interest calculation
For deposits of 2 quarters and above

  • Interest is calculated quarterly compounded for complete quarters.
  • In the case of an incomplete terminal quarter, interest is calculated proportionately based on the actual number of days, considering the year as 365/366 days.

Maturity amount calculation

  • The Maturity Amount mentioned in the receipt is computed without considering the TDS effect.
  • When calculating interest for half-year (quarterly compounded), the interest from the previous half-year (quarterly compounded), minus TDS, is added to the principal amount for calculating the interest for the current half-year.

For short deposits of less than 2 quarters but more than 1 quarter

  • Simple interest is paid for the complete quarter.
  • Additional interest is provided for the remaining days, considering the year as 365-366 days, without applying compound interest.

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For short deposits of less than one quarter
Interestis calculated proportionately based on the actual number of days, considering the year as 365-366 days.
Jana Small Finance Bank
Jana Small Finance Bank bases its interest computation on the actual number of days in a year, utilizing 365 days for non-leap years and 366 days for leap years. The deposit tenor is calculated in terms of the number of days.
Au Small Finance Bank
Au Small Finance Bank’s interest calculation involves considering the actual number of months and days in a year. In instances where the deposit spans both a leap and non-leap year, interest is calculated based on the respective number of days (366 for leap years and 365 for non-leap years).
IDFC FIRST Bank
IDFC FIRST Bank rounds up the interest to the nearest rupee and calculates it based on 365 days for fixed deposits in non-leap years and 366 days for those in leap years.
HDFC Bank
HDFC Bank computes interest by considering the actual number of days in a year. If the fixed deposit spans both leap and non-leap years, the interest is calculated based on the specific number of days for each year (366 days for leap years and 365 days for non-leap years).