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Clients can now rake in interest yields from demand deposits at their bank accounts every quarter, instead of once a year calculated before.
Analysts say a shortened period of interest calculation, in response to a central bank circular, is another step moving toward the liberalization of interest rates.
China scrapped the upper cap on loan interest rate and lower limit on deposit interest rate in October, 2004.
That theoretically means a commercial bank can set as high as possible a loan interest rate and a deposit interest rate as low as it can.
But all banks post the ceiling of deposit interest rate permitted by the central bank -- which are still in place -- so as not to lose clients.
The quarter-by-quarter compound interest calculation method actually bring clients very minor benefits as, for instance, 10,000 yuan (US$1,233) of current deposits yield 57.72 yuan in interest income a year after deducting taxes, only 0.12 yuan more than the income by year-by-year calculation.
(Xinhua News Agency September 23, 2005)
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