Savings Account Interest Rates – Forbes Advisor INDIA

The interest rate on a savings bank account is crucial because it helps the consumer determine how much they can earn on the parked money. Both public and private sector banks offer interest on their savings accounts to allow users to earn maximum interest.

We’ve put together a list of savings account interest rates to help you choose the account that best suits your needs.

How do banks calculate interest?

Banks in India calculate interest daily on the closing amount of that particular day; let’s understand this with an example. An account has INR 1 lakh at the end of the day and the bank provides 3% interest, then the simple interest formula will be used to calculate the interest on that sum for that particular day.

The procedure is as follows:

100,000 X 3/100 X number of days/ 360

100,000 X 3/100 X 1/360 = INR 8.333

INR 8.333 is the interest for a single day.

X = multiplication sign

This process will take place every day on the amount and will be credited to the account every month. Once the amount is credited, the aggregate (amount + interest) will be considered as the principal amount, this means that the account holder will get interest on the amount deposited by him and also on the interest he received from the bank . This method is known as compound interest.

Role of Repo Rate in Interest Calculation

Some of the banks as per the tables below have linked their interest rates to the repo rate and therefore any fluctuation in the repo rate will also change the interest rate. Now, to better understand this process, we will first need to understand the term repo rate.

• The repo rate is the interest at which the central bank of a country (RBI in India) transfers money to other banks.
• RBI recently increased its repo rates.

As we understand that the repo rate is the interest at which banks get loans from RBI so any increase in it will increase the financial burden on the bank, although RBI lends money at a rate of lower interest than the banks charge their applicant but nevertheless the burden of the increase will ultimately fall on the bank’s customers. Eventually, customers pay more interest on their loans.

While this increases the burden on people repaying their loans, it is beneficial for people’s deposits like savings and time deposits (FDs) making them more valuable to banks as they meet their cash needs. without borrowing money from an external source like RBI. . Therefore, increasing the repo rate will increase the interest rate on any type of deposit.

There is no standardized rule to link interest rates to repo rates and banks apply it as they see fit, for example Axis Bank a month ago had deposits above 10 crore linked to repo rate. After the RBI raised the repo rate in May, Axis Bank switched to the simple interest method and stopped linking the interest rates offered to the repo rate.

The formula for applying repo interest rates is also not standardized and differs from bank to bank.

Public sector bank interest rates

The Indian government has merged a few public sector banks for ease of management, therefore the interest rates of the merged banks will be those of the bank with which they will merge.

The interest rates of the majority of Indian banks are as follows:

Bank of Baroda

Bank of India

Bank of Maharashtra

Canara Bank

central bank of india

At the Central Bank of India, interest on deposits above INR 10 lakh is tied to the repo rate.

Overseas Indian Bank

Bank of Punjab and Sindh

National Bank of Punjab

National Bank of India

UCO Bank

Private sector bank interest rates

Axis Bank

At Axis Bank, interest on deposits of INR 10 crore and more than INR 10 crore is tied to repo rates.

Bandhan Bank

CSB Bank

city ​​union bank

DCB Bank

Dhanlaxmi Bank

federal bank

The Federal Bank has tied interest on deposits to the repo rate.

HDFC Bank

ICICI Bank

IDBI Bank

IDFC FIRST Bank

IndusInd Bank

Bank of Karnataka

Karur Vysia Bank

Kotak Mahindra Bank

National Bank

RBL Bank

Bank of South India

Commercial Bank of Tamilnad

Yes Bank

Frequently Asked Questions (FAQ)

Can a person open two bank accounts?

Yes, with proper documentation one can open any number of bank accounts.

Can NRIs (Non Resident Indians) open bank accounts in India?

Yes, NRIs can open bank accounts if that particular bank facilitates it, at present more or less all banks facilitate such accounts.

Is a basic deposit required to open an account?

It differs from bank to bank, in most cases, but the amount differs from bank to bank.

Is income from savings accounts taxed?

Yes, under Section 80TTB any income exceeding a deduction of INR 10,000 from a savings account will be taxed.