Recently, the Reserve Bank of India has taken steps to increase the level of transparency in bank loans. For example, RBI has restricted banks from charging higher interest rates and at the same time projecting them as "zero interest loans". However, banks continue to follow less transparent practice with other products and most important among them is the interest paid on fixed deposits (FDs). For example, the FD pamphlets from most banks usually carry two columns - one for the interest rateand other for the "annualised yield". The explanation to the annualised yield column will also state that the "annualised yield is calculated on the basis of quarterly compounding for the entire tenure".
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