How is savings account interest calculated in Nepal?

Banks calculate it on your daily closing balance, not on the lowest balance of the month. Each day's balance earns interest for that one day at the annual rate divided by 365, and the bank adds up every day's slice over the period. So every rupee earns interest for exactly the number of days it actually sits in the account. The accumulated interest is then credited to your account, usually quarterly though some banks do it monthly.

What is the formula for savings interest in Nepal?

Interest for a day = (that day's closing balance × annual interest rate) ÷ 365. The bank repeats this for every day in the period and totals it. As a quick estimate, Rs 1,00,000 held at 5% per annum earns about Rs 5,000 over a full year, or roughly Rs 415 a month, before the 6% tax is deducted. The 365-day divisor is standard banking practice, not a figure you set.

What savings interest rates do Nepali banks pay right now?

Through FY 2082/83, regular savings rates at commercial banks have clustered roughly between 2.75% and 5.5% per annum, with ordinary accounts near the 2.75% floor and premium remittance or special savings accounts at the top of the band. Banks set their own rates and republish them every Nepali month, so the exact figure on your account can change month to month as the rate environment moves.

Is savings account interest taxed in Nepal?

Yes. Banks deduct 6% TDS at source on interest paid to individuals, and it is a final tax, so you do not re-declare it at your salary slab rate. The bank credits the interest already net of the 6%. If your account shows Rs 415 of interest, the bank withheld about Rs 25 and you keep roughly Rs 390. Track the gross figure, not the net, so you know your real yield.

Does falling below the minimum balance wipe out my interest?

No. Under the daily-balance method, you simply earn interest on whatever lower balance sits in the account each day; the days you held more still earned their full slice. What dropping below the minimum balance can trigger is a separate non-maintenance fee, which varies by bank and account type. Zero-balance and financial-inclusion accounts avoid that fee entirely. The fee, not lost interest, is what bites.

How Savings Account Interest Is Calculated in Nepal

Q: Why is the interest on my savings account so low?

Two reasons. First, savings deposits are the cheapest funding a bank has, so banks pay the least for them; fixed deposits and recurring deposits pay more because you lock the money up. Second, NRB rules cap the gap between a bank's highest individual fixed-deposit rate and its lowest savings rate at 5 percentage points, and limit how schemes differ, which keeps ordinary savings rates clustered near the bottom. For idle cash beyond your buffer, an FD or RD earns materially more.

A reader kept Rs 3 lakh in his savings account for most of a month, moved it out for a big payment near the end, and noticed the interest the bank credited that quarter looked far smaller than he expected. His worry: had he lost a whole month's interest by emptying the account on the 28th? He hadn't. The way Nepali banks calculate savings interest, the 27 days he held Rs 3 lakh each earned their own slice; only the last few low-balance days earned little. He had been quietly taught the difference between the old method and the current one, and never noticed the switch.

Most people treat the interest line on their statement as a small mystery the bank resolves in its own favour. It isn't a mystery. There is one formula, a fixed divisor, and a tax deduction, and once you can see them you can tell whether your money is being put to work or sitting idle.

Daily balance, not the month's lowest

The single most important thing to know is the method, because it changed the math entirely.

Under the old minimum-balance method, a savings account earned interest only on the single lowest balance it held during the month. One dip near month-end could wipe out the interest on a large balance held the other 29 days. Hold Rs 5 lakh for the month, withdraw Rs 4.9 lakh on the 30th for a payment, and the bank would compute interest on Rs 10,000.

Nepali banks now calculate on the daily closing balance instead. Himalayan Bank's own savings product page states it plainly: interest is "calculated on daily balance basis, capitalized on quarterly basis." Every day's closing balance earns interest for that one day, and the bank sums the slices across the period. The dip on the 30th now costs you interest for one day, not the month. This is strictly better for anyone whose balance moves around, which is everyone with a salary landing and bills going out.

The formula, and a number you can check

The daily calculation is simple arithmetic:

Interest for a day = (day's closing balance × annual rate) ÷ 365

The bank runs this for all 365 days and adds them up. The 365-day divisor is standard banking practice rather than a figure you choose. A worked example on a steady balance:

Balance held	Rate	Per year	Per month (approx)
Rs 1,00,000	5%	Rs 5,000	~Rs 415
Rs 5,00,000	5%	Rs 25,000	~Rs 2,083
Rs 1,00,000	3%	Rs 3,000	~Rs 250

These are gross, before tax. If your account holds Rs 1 lakh all month at 5% and the bank credits something close to Rs 415 (less the 6% deduction), the math is working as designed. If it credits far less, your average daily balance was lower than you think, money probably left and re-entered the account mid-month, which is exactly what the daily method captures.

Monthly or quarterly crediting

Calculating daily and crediting are two different events. The interest accrues every day, but the bank only posts it to your account on a schedule.

Practice varies. Himalayan Bank capitalises quarterly. Many banks credit monthly, and senior-citizen accounts often pay monthly by design. The schedule does not change how much you earn over a year, only when it shows up. One small effect of more frequent crediting: once interest is posted, it joins your balance and starts earning its own interest, so monthly capitalisation compounds slightly faster than quarterly. On a savings balance the difference is tiny; on a long fixed deposit it matters more.

The 6% tax that trims every credit

The interest you see is already net of tax. Banks deduct 6% TDS at source on interest paid to individuals, and it is a final tax, so you never re-declare it at your salary slab. This is the same final-withholding treatment that applies to FD interest: the bank handles it, and the matter is closed.

The arithmetic on the Rs 1 lakh example: Rs 415 of gross monthly interest, about Rs 25 withheld, Rs 390 credited. Over a year that's roughly Rs 5,000 earned and Rs 300 to tax. It is small at savings-account scale, but the habit worth keeping is to track the gross figure. The net number the bank credits understates what your money actually earned, and if you ever compare accounts or instruments on yield, you want the pre-tax figure to compare like with like.

Minimum balance: a fee, not a forfeit

A common fear is that dropping below the minimum balance erases your interest. It doesn't, and the daily method is why.

Because interest accrues on each day's closing balance, the days you held plenty still earned their full slice. The days you sat below the minimum simply earned interest on that smaller amount. What a sub-minimum balance can trigger is a separate non-maintenance charge, set by the bank and the account type. Himalayan Bank's normal savings, for instance, asks for Rs 2,500 inside the valley and Rs 1,000 outside; other products range from Rs 100 to several thousand. Zero-balance and financial-inclusion accounts carry no minimum and no fee. So the cost of a low balance is a possible flat fee, not lost interest, and choosing the right account type is how you avoid it. The savings-account selection guide goes through which fees actually bite.

Why the rate is low to begin with

Even with the friendly daily method, a savings account is never going to pay much. There are two structural reasons.

Savings is the cheapest money a bank holds. You can withdraw it any day, so the bank can't lend it as confidently as a locked deposit, and it pays you the least for that flexibility. Lock the same money in an FD or a recurring deposit and the rate roughly doubles, because you have promised not to touch it.

The second reason is regulatory. NRB caps the gap between a bank's highest individual fixed-deposit rate and its lowest savings rate at 5 percentage points, limits the difference between a bank's own deposit schemes to about 2 points, and restricts how far a bank can move deposit rates month to month. The effect is that ordinary savings rates stay clustered near the floor, currently around 2.75%, while the band tops out near 5.5% for premium or remittance accounts. Why the whole band drifts up and down over time is a separate mechanism, the base rate and the NRB corridor, and it explains why your rate was higher two years ago.

The practical takeaway: a savings account is for the buffer you need on tap, not for building wealth. Keep your emergency cash and one month of bills there, where the daily method makes sure every day counts, and move the surplus to something that pays for being locked up.

What you actually need to know

It's the daily balance, not the month's lowest. Each day earns (balance × rate ÷ 365), summed across the period, so every rupee earns for exactly the days it's there. A mid-month dip costs you one day, not the month.
The 6% TDS is final, and the rate is structurally low. The interest you see is already net of tax. Savings pays little because it's the cheapest money a bank holds and NRB rules cap how high the rate can sit relative to FDs.
Use savings for the buffer, not the surplus. Keep your emergency cash and a month of bills where it's instantly available, and move idle money into an FD or RD that pays you for locking it up.

Want to check whether your savings interest credit matches what your balance should have earned? Email parjanya57@gmail.com with the balance, the rate, and the credited figure, and I'll reconcile it with you.

This post is part of the Nepal Money Basics guide — the saving section.