THERE is now a situation where depositors in savings bank accounts can ensure a higher amount of earning with respect to their investments. This is an important thing because the deregulation of the interest rates on these accounts has meant that some of the banks are offering interest rates higher than 4 per cent to attract deposits. However in this entire process there is a need to check about the conditions that need to be fulfilled to get the benefit and how the individual will actually ensure that this is completed.

Up till Rs 1 lakh: There are two distinctions that banks have to make with respect to the amounts that are actually lying in the savings account. The first one is that the initial limit for the purpose of distinction for different rates is an investment barrier of Rs 1 lakh.

This means that there has to be equal treatment for the amounts lying in the accounts up to this specific figure. There cannot be any discrimination between the investors or depositors who keep money till this figure. So for example, the bank can have a rate of say 5 per cent for the deposits till Rs 1 lakh, but it will ensure that someone who has a deposit of say Rs 40,000 will get the same rate as someone who has a higher figure of Rs 80,000. This ensures that the situation is such that the barrier limit is protected for all deposit holders equally.

Above Rs 1 lakh: The distinction that can be done is possible for the income that is above the figure of Rs 1 lakh, so there can be favourable treatment that is meted out to those people who actually put up a higher amount. This is already being witnessed with some private banks offering a higher rate of interest that goes up to 6 per cent or even 7 per cent for those people who are willing to put the higher amount of deposits with them in the savings bank account.

End of day balances: A point that a lot of people often forget is that the method to calculate interest is quite important and this hold a big difference when it comes to the savings bank account and the fixed deposits. When there are fixed deposits, the rate of interest is known but the amount has to be invested for the specific period of time so that this is locked up for this period, and hence there is no access to the amount available. An early withdrawal can lead to a penalty in the form of a lower interest earned. In the savings account on the other hand the money can be used at any point of time. The method for the calculation of the interest is such that this has to be done on the end of day balance so this is the figure that would be considered for the purpose of the calculations. The individual who has large amounts available with them can ensure that by consolidating amounts they are not undertaking more additional efforts to get the higher rate of return that is available.