Savings Bank interest rates

Savings Bank interest rates

Every individual has a Savings Bank account, but pays little attention to the interest earned on the balance in this account. Some people may not even know that the balance they maintain in their savings bank accounts earn an interest. In the past, before RBI had deregulated the savings bank interest rate regime, all banks were offering the same interest rate, which was 4% per annum. When RBI brought about changes in 2011, banks became free to decide the interest rate they wanted to pay on their savings bank accounts, depending on their liquidity and profitability preferences.

Sl.No	Bank	Category	Savings Bank Interest Rates	Remarks
1	Yes Bank	Private	7.00%	For AQB more than Rs 1 Lac. & 6% for less than 1 Lac
2	Kotak Mahindra Bank	Private	6.00%	For AQB more than Rs 1 Lac. & 5.5% for less than 1 Lac
3	Indus Ind Bank	Private	5.50%	For AQB more than Rs 1 Lac. & 6% for more than 1 Lac on incremental amt
4	Ratnakar Bank	Private	5.50%	For AQB more than Rs 1 Lac. & 6.1% for more than 1 Lac on incremental amt
5	State Bank of India	Public	4.00%
6	HDFC Bank	Private	4.00%
7	ICICI Bank	Private	4.00%
8	Bank of Baroda	Public	4.00%
9	Union Bank of India	Public	4.00%
10	Punjab National Bank	Public	4.00%
11	Axis Bank	Private	4.00%
12	Canara Bank	Public	4.00%
13	All other Public & Private Banks	Public / Private	4.00%

How is savings bank interest rates calculated?

Previously, the interest rate of 4% per annum was applied against the lowest balance available in the account between the 10th and the final day of the month. This was seen as a very unfriendly method of calculation, as the depositor did not receive full benefits of the amount he maintains in his account. From April 2010 onwards, this changed and the savings bank interest is now calculated based on the daily balance method. This means that you will earn interest based on the closing balance you maintain every day, giving you the maximum benefits. For example, let's say that your bank pays you an interest rate of 5% on your savings bank account. You have the following transactions during the month:

1st of the month: Balance in the account is Rs 3 lakhs

21st of the month: Withdraw Rs. 1 lakh ' Balance in the account is Rs 2 lakhs

25th of the month: Deposit Rs. 2 lakhs ' Balance in the account is Rs 4 lakhs

31st of the month: Balance in the account is Rs 4 lakhs

Your savings bank interest amount will be calculated at 5% on Rs 3 lakhs for 20 days, Rs 2 lakhs for 4 days, and Rs 4 lakhs for 7 days, instead of the earlier method wherein the interest is calculated on the minimum balance of Rs 2 lakhs. Thus, you stand to earn more in the present times than what you might have earned in the past

How much you can earn on High Savings Bank Interest Rates:

The following calculations are for Rs 1 lac

In normal instances (in case of all public & many Private Banks)- with 4% interest rates the amount earned will be Rs 4000 Per Annum

Incase of Yes Bank - with 7% interest rates the amount earned will be Rs 7000 Per Annum... it means an extra benefit of Rs 3000/-

Taxation of Savings Bank Interest rates:

Unlike interest on fixed deposits, interest earned on savings bank accounts is not subject to Tax Deduction at Source. However, this does not mean the interest earned on Savings accounts is completely tax free. It is exempt upto Rs. 10,000 in a year, and if the interest you earn from Savings accounts crosses this threshold, it becomes subject to tax.

Things to look out for before you shift your Savings Bank accounts based on the interest rate:

As mentioned earlier, only a few banks offer high interest rates. However, you need to consider a few factors before you jump to shift your account. Ascertain the minimum balance to be maintained and the account closing fees. Sometimes minimum balance can be waived off if a fixed deposit is opened with the bank. Also evaluate the service charges and various ancillary fees. After all, your Savings account should offer you a host of benefits, rather than simply earning you interest.