Best savings account interest rates: Forget 4%, when you can earn almost double that on your deposits

According to an RBI guidelines, the interest you earn on your savings account is calculated on daily basis.

Just like current account, savings account is also a popular form of bank account that individuals prefer to have. Photo: PTI

Just like current account, savings account is also a popular form of bank account that individuals prefer to have. A savings account is a very secure form of investment, and is meant for everyone be it individual, senior citizen or company. One of the key factors of savings would be that, you can park your money, withdraw it whenever you want and still earn interest rate on it. Hence, savings account comes with dual benefit of liquidity and interest. Currently, there are a host of savings accounts offered by banks such as for kids, women, pensioners, government employees and much more. According to an RBI guidelines, the interest you earn on your savings account is calculated on daily basis. However, the interest is credited in your account on intervals like quarterly, yearly or even monthly. At present majority of banks offer up to 4% interest rates on savings account. But it will be advisable to always compare before opting for a savings account as there are other lenders, including even small finance banks, who offer much higher interest rates.

Let’s compare:

Currently, the state-owned lender State Bank of India (SBI) has linked its saving deposit account above Rs 1 lakh balances with external benchmark. Therefore, here if your savings account balance is above Rs 1 lakh then you will earn interest of 3.25%. While less than Rs 1 lakh balance will help you enjoy 3.50% interest.

Meanwhile, a customer here who has maintained a saving balance of upto Rs 50 lakh at HDFC Bank, will enjoy interest rates of 3.50%. While balance over Rs 50 lakh, he or she will receive 4% interest rates. Similar interest rates are given by ICICI Bank, Bank of Baroda and Punjab National Bank on their savings accounts.

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Interestingly, Mumbai-based RBL Bank offers upto 7% interest rates on balances above Rs 3 crore to Rs 5 crore. While for saving account balances of Rs 10 lakh up till Rs 3 crore, a customer can enjoy rate of 6.50%. On balances from Rs 1 lakh to Rs 10 lakh, interest of 6% is given. Whereas on below Rs 1 lakh daily balances, you can enjoy 5.5% rate.

But did you know that DBS Bank even gives 7% interest rates on savings account whose daily balances are above Rs 1 lakh and upto Rs 2 lakhs? Well yes, it does. Meanwhile, daily balance below Rs 1 lakh enjoys 5.5% rate. However, daily balance between Rs 2 lakhs to Rs 5 lakhs, an interest rate of 5% is given. And above Rs 5 lakh balance 4% interest rate is offered.

There is also Ujjivan Small Finance Bank which provides 7% interest rates on over Rs 5 crores saving account balances. 4% interest is given upto Rs 5 lakh balance, followed by 5.50% rate on between Rs 5 lakh to Rs 50 lakh balance and finally 6.75% rate on above Rs 50 lakhs till Rs 5 crore.

Apart from above, there are also Kotak Mahindra Bank and Yes Bank who offer interest rates between 4% to maximum 6% on savings account.

To earn the above mentioned interest rates, it is of utmost importance that you fulfill the minimum balance requirement. Every bank decides your interest rates depending upon the average balance you have maintained with them. The average balance is calculated by taking into consideration your daily balance dividing it with number of days in a defined period. If account holders failed to maintain average balance, you can forget earning interest rates and in fact you will be liable to pay fees and charges!

It needs to be noted that, interest which you earn on savings account is eligible for tax deducted at source (TDS). They fall under the tax bracket of income from other sources of Income Tax Act. If your interest amount exceeds Rs 10,000, you will pay taxes at a marginal rate.

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