Credit interest capitalized in HDFC refers to the process of adding accrued interest to the principal balance of a savings or fixed deposit account. This means that the interest earned on these accounts is added to the principal amount at regular intervals, such as quarterly or annually, and then earns interest on the new, increased balance.

In the case of HDFC, interest is calculated on a daily basis as simple interest and charged only on the amount drawn and the period for which it is utilized. Interest accrued is auto-debited from the salary account at the last day of the month. In case of insufficient balance, debited interest must be serviced by salary credit or any other credit within 30 days of debit.

For example, if a customer has INR 5,000 balance in their salary account and withdraws/draws a cheque for INR 10,000, INR 5,000 will be swept from the overdraft limit, and interest charges will start from the date of withdrawal. If the customer funds the salary account to the tune of INR 10,000 after 5 days, INR 5,000 will be swept into the overdraft account for settling the dues, and the customer will have INR 5,000 left in their salary account. The interest charged for 5 days only will be Rs 10.27/-, which is calculated as 5,000 * (15%/100) * (5/365) .