As of today most banks like SBI, ICICI Bank, Union Bank of India, Punjab National Bank (PNB) offer 3.5% interest on their saving bank account. This all started with SBI slashing interest rates on savings account to 3.5% on July 31, 2017 for balance less than Rs 50 Lakh. Reserve Bank of India (RBI) had deregulated the interest rate offered on Savings Account by banks in October 2011. It was expected then that a lot of banks would compete for this and offer competitive rates. But unfortunately there were just handful banks which offered higher interest rates while now every bank is ready to reduce the rates below 4%.
Best interest rate on savings account in India
The highest Saving Account interest rate is being offered by digibank by DBS at 7% for balance between Rs 1 to 2 lakh. Other than this only following 5 banks offer higher than 3.5% interest rate: Bandhan Bank, Kotak Mahindra Bank, Lakshmi Vilas Bank, Ratnakar Bank and Yes Bank.
The good news is most new age Small Finance Banks offer interest rate of 4% or higher on their savings account. Suryoday Small Finance Bank offers 7.25% for balance between Rs 1 to 10 Lakh. Similarly Fincare Small Finance Bank offers 7% interest for balance of more than Rs 1 Lakh.
Also Read: Highest Interest Rate on Bank Fixed Deposits
The table below shows the interest rate offered by banks on its saving account. We have highlighted banks which offer more than 4% .(X means no info was available on the bank’s website as of research date)
| Saving Account Balance | ||||
| Banks | up to 1 Lakh | 1 – 5 Lakh | 5 – 10 Lakh | 10 Lakh + |
| Allahabad Bank | 3.50% | 3.50% | 3.50% | 3.50% |
| Andhra Bank | 3.50% | 3.50% | 3.50% | 3.50% |
| Axis Bank | 3.50% | 3.50% | 3.50% | 3.50% |
| Bandhan Bank | 4.00% | 6.00% | 6.00% | 6.00% |
| Bank of Baroda | 3.50% | 3.50% | 3.50% | 3.50% |
| Bank of India | 3.50% | 3.50% | 3.50% | 3.50% |
| Bank of Maharashtra | 3.50% | 3.50% | 3.50% | 3.50% |
| Canara Bank | 3.50% | 3.50% | 3.50% | 3.50% |
| Catholic Syrian Bank | 4.00% | 4.00% | 4.00% | 4.00% |
| Central Bank of India | 3.50% | 3.50% | 3.50% | 3.50% |
| Citibank | 3.50% | 3.50% | 3.50% | 3.50% |
| City Union Bank | x | x | x | x |
| Corporation Bank | 3.50% | 3.50% | 3.50% | 3.50% |
| DCB Bank | x | x | x | x |
| Dena Bank | x | x | x | x |
| Deutsche Bank | x | x | x | x |
| Dhanalakshmi Bank | 3.50% | 3.50% | 3.50% | 3.50% |
| Digibank by DBS | 6.00% | 7.00% | 4.00% | 4.00% |
| Federal Bank | 3.50% | 3.50% | 3.50% | 3.50% |
| HDFC Bank | 3.50% | 3.50% | 3.50% | 3.50% |
| ICICI Bank | 3.50% | 3.50% | 3.50% | 3.50% |
| IDBI Bank | 3.50% | 3.50% | 3.50% | 3.50% |
| IDFC Bank | 3.50% | 3.50% | 3.50% | 3.50% |
| Indian Bank | 3.50% | 3.50% | 3.50% | 3.50% |
| Indian Overseas Bank | 3.50% | 3.50% | 3.50% | 3.50% |
| Indus Ind Bank | 4.00% | 4.00% | 4.00% | 5.00% |
| J&K Bank | 3.50% | 3.50% | 3.50% | 3.50% |
| Karnataka Bank | x | x | x | x |
| Karur Vysya Bank | x | x | x | x |
| Kotak Mahindra Bank | 5.00% | 6.00% | 6.00% | 6.00% |
| Lakshmi Vilas Bank | 4.00% | 5.25% | 6.25% | 6.25% |
| Oriental Bank of Commerce | 3.50% | 3.50% | 3.50% | 3.50% |
| Post Office Savings Account | 4.00% | 4.00% | 4.00% | 4.00% |
| Punjab and Sind Bank | 3.50% | 3.50% | 3.50% | 3.50% |
| Punjab National Bank | 3.50% | 3.50% | 3.50% | 3.50% |
| Ratnakar Bank | 5.50% | 6.00% | 6.00% | 6.50% |
| Repco Bank | x | x | x | x |
| South Indian Bank | 4.00% | 4.00% | 4.00% | 4.00% |
| Standard Charted Bank | 3.50% | 3.50% | 3.50% | 3.50% |
| State Bank of India | 3.50% | 3.50% | 3.50% | 3.50% |
| Syndicate Bank | 3.50% | 3.50% | 3.50% | 3.50% |
| Tamilnad Mercantile Bank | x | x | x | x |
| UCO Bank | 3.50% | 3.50% | 3.50% | 3.50% |
| Union Bank of India | 3.50% | 3.50% | 3.50% | 3.50% |
| United Bank of India | 3.50% | 3.50% | 3.50% | 3.50% |
| Vijaya Bank | 3.50% | 3.50% | 3.50% | 3.50% |
| Yes Bank | 5.00% | 6.00% | 6.00% | 6.00% |
Small Banks | ||||
| AU Small Finance Bank | 5.00% | 6.50% | 6.50% | 6.75% |
| Capital Small Finance Bank | 4.00% | 4.00% | 4.00% | 4.00% |
| Equitas Small Finance Bank | 6.00% | 6.00% | 6.00% | 6.50% |
| ESAF Small Finance Bank | 4.00% | 6.50% | 6.50% | 7.00% |
| Fincare Small Finance Bank | 6.00% | 7.00% | 7.00% | 7.00% |
| Jana Small Finance Bank | 6.00% | 6.00% | 6.00% | 6.00% |
| Suryoday Small Finance Bank | 6.25% | 7.25% | 7.25% | 7.00% |
| Ujjivan Small Finance Bank | 4.00% | 4.00% | 5.50% | 5.50% |
| Utkarsh Small Finance Bank | x | x | x | x |
Payment Banks | ||||
| Aditya Birla Payments Bank | 4.00% | x | x | x |
| Airtel Payment Bank | 5.50% | x | x | x |
| Fino Payments Bank | 4.00% | x | x | x |
| PayTm Payment Bank | 4.00% | x | x | x |
| Post Office Payment Bank | 5.50% | x | x | x |
Updated on August 5, 2018
The interest is generally paid at every calendar quarter on 30th June, 30th September, 31st December and 31st March.
Interest is calculated on daily basis, basis the end of day ledger balance in the account.
The Benefit?
Additional Interest: If you keep 1 Lakh in your savings account, at 4% you would get Rs 333.33 as interest per month while with 7% you would get Rs 583.33. So you would earn additional Rs. 250 per lakh per month.
Tax Efficient: Also in Budget 2012 Finance Minister had exempted interest income up to Rs 10,000 from Savings Account every financial year under section 80TTA. So there would be situations where people in higher tax bracket would be better off by putting money in Savings Account than doing Fixed Deposit.
Budget 2018 introduced a new Section 80TTB. According to this Senior citizen can claim tax exemption up to Rs 50,000 on interest income from bank/ post office fixed deposit, recurring deposit or savings account.
Also Read: 21 Hidden Charges in Saving Bank Account
Should You Get New bank Account?
The next question is should you go to these banks to get benefit of enhanced interest rates on savings account?
The answer depends on a few factors namely:
1. How much money do you keep in your savings bank account?
If you are someone who has a large balance in savings account you might want to opt for accounts offering higher interest rates. For everyone with not very significant balance an additional account does not make sense.
2. Do you want to pay charges associated with the new savings account?
Even if you have higher balance in your account, do you want to get an additional account and keep a track of all the new charges banks impose on accounts. Also you’ll need to maintain minimum balance.
3. Your Tax Bracket?
If you are in 30% tax bracket then it makes sense to have some money in savings account yielding higher interest rates than rush for short term Fixed Deposit.
Also Read: High Rated Company FDs Offering more than Bank Fixed Deposits
Alternatives:
Most banks offer sweep in facility where the amount in excess of pre specified automatically goes into fixed deposit. So you might take advantage of the same rather than going for a new account. But remember the interest earned in sweep in account is fully taxable as your interest income from fixed deposit.
All banks interest rate are same below 4% below 1 lac deposit. DBS bank not available in all cities. I think sbi mod is best choice to invest money and get 6% interest.