Why APY is higher than the nominal rate
For a nominal 8% annual rate compounded monthly, ₹100 grows to ₹108.30 over a year — an effective annual yield (APY) of 8.3%, higher than the stated 8%, because interest earned in earlier months starts earning its own interest before the year is out.
More frequent compounding pushes APY higher still
The same nominal 8% rate compounded daily instead grows ₹100 to ₹108.33 — an APY of 8.33%, a small additional increase from compounding 365 times a year instead of 12.
The once-a-year case confirms the logic
Compounded just once a year (n=1), the same nominal 8% rate produces an APY of exactly 8% — identical to the nominal rate. APY only exceeds the nominal rate when compounding happens more than once a year; with no compounding within the year, there's nothing extra to add.
Why APY is the fairer number for comparing deposits
Two deposit products quoting the same 8% nominal rate can pay out different actual returns if one compounds monthly and the other compounds quarterly — APY strips out that difference and shows the real annual return each one actually delivers.