Highest Savings Bank Account Interest Rates in India

After the recent deregulation of savings bank account interest rates by RBI, at least three banks have hiked their interest rates.

Yes Bank was the first one to raise the interest rates on savings account with all balances to 6%, and this was followed by Indus Ind and Kotak bank announcing interest rates hikes on their savings accounts too.

I think other banks are going to follow suit soon, and I’m going to maintain a list of the best savings bank account interest rates on this page which will be updated periodically.

To start with, these are the three banks that have announced a hike in their interest rates.

S.No. Name Under Rs. 1 lakh Over Rs. 1 lakh
1 Yes Bank* 6.0% 7.0%
2 Indus Ind Bank 5.5% 6.0%
3 Kotak 5.5% 6.0%
4 Karnataka Bank 4.0% 4.0%**

*Yes Bank’s press release on their website.

**Karnataka Bank offers 5% for deposits over two lakhs.

Thanks to Hari for leaving comments and informing me about this.

Bemoneyaware caught the fact that the original RBI notification was being interpreted in at least two different ways – one was that all banks will have to pay the same interest rate on deposits of less than Rs. 1 lakh, and the other was that banks were free to decide the interest rates on deposits of less than a lakh as long as they don’t create slabs under that amount.

The fact that these banks have set up different rates for deposits of less than Rs. 1 lakh helps clarify that and show that there will be differential rates even for savings bank balances of less than a lakh. This is good because a large number of people will fall under this category.

Once again – thanks to Hari and Bemoneyaware for their timely and keen inputs.

Update: Thanks to Vivek for pointing out that Karnataka Bank has also raised their interest rates. 

63 thoughts on “Highest Savings Bank Account Interest Rates in India

  1. I was talking to my American colleagues about this, and their heads exploded! Its 0.35% here in US. What stops them from opening accounts in India and getting this interest (esp when the exchange rates are this high)? Anything?

      1. You and your friends can contact any of the major Australian Banks ( AA rated), namely NAB ( National Australia Bank), ANZ, Westpac or Commonwealth Bank of Australia, as their rates are around 5.70% or if they want to keep in an online account then thats even better. NAB has a sister concern in US called Great Western Bank and if assistance is needed you or your friends can call NAB on +61-3-8641-9013. These are Personal bankers who can manage this process for you and your friend.

        Hope this helps

        Regards

        Ashish

    1. heads exploded 🙂
      tell them to compare the inflation rate, the heads will re-explode

      There is a risk of Rupee depreciating further.
      A dollar one year down the line with .35% will buy more stuff
      than a dollar converted to Rs with 6% interest and then converted back to dollar

      1. Hemal,

        You make a good point about the currency depreciation risk. However, the inflation is only a concern if those converted dollars must be spent in India. If the dollars can be taken abroad, they can be spent somewhere where dollars are accepted and inflation is steady–or decreasing. This is a strategy that I would love to implement myself, if only I could open a savings account!

      2. Hey hemal,
        Can u pls explain in detail ur point..
        About dollar earning more stuff wen rupee is depreciating
        and dollar converted into rupees can buy more stuff.

        1. What he is saying is that suppose an American decides to invest $1,000 in SBI at 9% when the USDINR rate is 1:50 – He will get Rs. 50,000 at this exchange rate and earn a return of Rs.4,500 so at the end of the year he will have Rs. 54,500.

          Now, suppose the INR depreciates and you can get more INR per Dollar say 1:54.50 – in this case when you convert the money back in Dollars you will only get $1,000 back and so you don’t earn anything at all. This is known as currency risk.

  2. Read in ET (30 Oct Sunday):ET epaper
    Banks with the lowest saving deposit rates as a share of total deposits will be aggressive with rates because this forms their lowest cost fund source
    Banks with saving deposits as % total deposits are as follows:
    SBI(36%), HDFC(31%), ICICI(29%), PNB(29%), Allahabad(26%), Axis Bank(23%), Union(23%), BOB(21%), BOI(20%), Indusland(9%), Yes(3&).

    No wonder HDFC Bank stock fell most after the announcement.

  3. Let’s see how the big banks like HDFC and SBI respond. But should you switch banks to take advantage of higher rates?

    If you still go ahead, check the fees. Most analysts believe that banks would offset higher costs by hiking fees for services. This can be in the form of higher lending rates for borrowers, transaction charges and increase in minimum balance requirement. The prudent way is to first gauge your usage pattern of banking services – do you frequently run out of cheque books or withdraw cash often. In that case, you need to also check what kind of charges banks levy for these

  4. Thanks Manshu for mentioning us. I would like to give credit to Hari as he put the link that made us go and check it.
    We also appreciate that you encourage your readers to leave the links for reference even though they might of similar/competitor websites. We have seen many websites removing the reference. Keep up the good work!

    1. Yes, big thanks to Hari.

      I don’t mind anything as long as it contributes to the discussion and forwards the understanding of the topic. However, I do realize that a lot of other bloggers / websites remove OneMint links from their comments section and forums. I know this because I check Google Analytics data quite regularly and click through all referring pages. Often when I find that a referring page has stopped sending traffic – I go to the original page and see that they have removed the link. It irritates me a little to see people leaving their links on OneMint but I will never remove them. That’s not the right thing to do.

  5. will this really help the customers. Once people shift to a particular bank the bank would subsequently change the interest rates. I feel this will be just a gimmick to attract people to their banks to open accounts.

    1. This is a more fundamental change than just a gimmick where you give a free coconut with a washing machine – this is a competitive market and people can easily move their funds around online so if banks act smart then you have the option of going away and taking your money elsewhere.

      1. Be that as it may but I don’t think many people will actually shift from “reliable” banks like SBI or HDFC to smaller and riskier “Yes Bank” types. And the big two private banks (ICICI and HDFC) will do their usual cartel thing and increase/decrease rates in tandem (their fixed deposit rates always move in sync).

        1. @Ashok:
          Just for your information, DICGC guarantees deposits up to 100000.
          Moreover YES Bank is 4th Largest Private Sector Bank, ahead of Kotak & Indusind and has lowest NPAs in the industry, so by no means it is riskier in my opinion 🙂

    1. Aren’t the corporates and proprietors mainly the ones who form the majority of liquid funds? I would assume that though the liquid funds might see reduced inflows, they will still see strong demand from that group.

  6. Thanks for your appreciation Manshu and bemoneyaware 🙂
    One more bank has upped its SB a/c interest rates wef 1-Nov-2011, this time its the smaller Ratnakar Bank – they are offering 5.5 % pa.

    1. NRO savings rate are usually the same as the regular saving rate, and NRE rates are quite low. There is a post here and you can go through that by going through the NRI category and reading that.

  7. Dear Mr Manshu,

    Kindly help in confirming if ICICI has also made some change to their savings accounts interest rate changes, and if yes then by how much.

    Waiting for your reply and by the ways thanks for the updates you have done in your website..

    1. Banks like ICICI have savings a/c which can dynamically above a min balance transfer the money to FD for 1 year thereby earning more interest rates, safely and auto transfer the money back to Savings a/c giving the interest on that many number of days the money was booked in FD (if there is a shortfall in savings a/c due to withdrawals).

  8. Hi

    so are you suggesting that we can open an account with the banks who are offering more on SB accounts? & keep the minimum amount in our existing banks like HDFC (INR10000.00) to gain interest!

    1. I don’t think that’s the intention. My feeling is that it is to make one aware and help in making better financial decisions.

      Changing bank simply because of deposit rate translates into minute gains.
      Kotab Bank ad. says : it is not 2% more but 50% zyada. lets’s see how much one gains:
      if Average Monthly Balance is 1,00,000 then interest at 4% will be 4000 and at 6% would be 6000 i.e 2000 Rs more per year which translates to 2000/12 = 150 Rs per month.
      And if Average Monthly Balance is 30,000 then interest at 4% will be 1200 and at 6% would be 1800 i.e 600 Rs more per year which translates to 600/12 = 50 Rs per month.

      Changing bank account means changing ECS, EMI payments etc.
      Please remember that Interest on Bank Account is taxed as per the income slab.
      Money kept in your savings account should ideally be for two purposes:

      First, to meet your monthly fixed obligations, including EMI payments on your home, auto and personal loans, utility bill and credit card payments.
      Second, as a buffer to meet contingencies.

      This is from my article Saving Bank Account:Do you know how interest is calculated and more

    2. No, not really that was not what I wanted to say. Do what’s convenient as chasing an extra percent or two for smaller amounts isn’t going to make a big difference in the end.

    1. Quoting from SBI website
      RATE OF INTEREST : 4.00% p.a. (w.e.f. 03.05.2011)

      I found it on a roundabout way on State Bank of India website. Go to State Bank of India website . Go to bottom of the page: you will find lots of links like:
      Home | Sitemap | FAQs | Right to Information Act 2005 | Disclaimer
      Click on Sitemap , On left hand side you will see
      BRANCH LOCATORS
      ATM LOCATORS
      FOREIGN OFFICES LOCATOR
      FOREX BRANCHES DOMESTIC
      INTEREST RATES
      FORMS

      Click on INTEREST RATES On left hand side you will see
      INTEREST RATES
      DEPOSIT RATES
      SAVINGS BANK DEPOSITS
      NRI
      LOAN SCHEMES
      AGRICULTURAL SEGMENT
      SME SEGMENT
      OLD INTEREST RATES [LAST 10 YEARS]

      Click on SAVINGS BANK DEPOSITS. You will get required information.
      Hope it helped.

  9. I opened an account with Yes Bank today . .
    The services are cool as well, min bal of 10K
    U get free DD making (5/month) any amount
    Any no of ATM TXNs across ATMs
    ofcourse 3% more interest as my avg balance will be above 200k
    plus the bank is right next to my office, so i can easily deposit cheques & withdraw as well

    Why keep money idle in ICICI or HDFC when same can feth more somewhere else?
    afterall, all i have to do is have a min bal of 10K . .

    So too much thought leads to nothing, I jus went ahead & opened.
    With net banking, moving money wont take much, pluc i can keep a reserve amount in ICICI for daily expenditure & rest can wait in Yes Bank ..

    1. Quoting from my article Saving Bank Account:Do you know how interest is calculated and more
      Money kept in your savings account should ideally be for two purposes:
      First, to meet your monthly fixed obligations, including EMI payments on your home, auto and personal loans, utility bill and credit card payments.
      Second, as a buffer to meet contingencies.

      Changing bank simply because of deposit rate translates into minute gains unless you have huge sum idling in the bank. Ex:
      If Average monthly balance is Rs 1,00,000 then at 4% you would earn 4000 but at 5.5% you would earn 5,500 Rs i.e gain of Rs 125 per month.

      Now you have to manage two accounts with min. balance in each. If you have made SIPs in Mutual Funds you would have to change the bank mandate etc. Economic times article suggested that one should change bank mainly because of inefficient service, weak financial situation.

  10. Interested in opening New Account, but not aware which one to open, monthly deposit close to 30K, starting from 1Lac, please suggest some bank, so athat i will get good returns on liquid money

  11. The budget comes as big boost to Yes Bank and Kotak, as interest upto 10,000 on saving account is tax free. Therefore, balance of upto 157000 in Yes Bank is tax free, weighted average post tax yield of 6.36%, comparable pre tax yield of 9.22%. Better to keep money upto such cut off amount in saving account of Yes Bank or Kotak, rather than put in FD, as former is fully liquid and there is no penalty on withdrawal.

    1. This is an interesting view point; do you have an account at Yes Bank? Do they give 6% on the entire amount that’s in your savings account or just the sum over Rs. 1,00,000?

      1. @Manshu:
        Yes Bank gives 6% for amount less than Rs. 1,00,000 and 7% for about >= 1,00,000 which is way better than any other bank. ankm83’s cut off of 157000 is in fact higher but the exact cut off is 139000 without attracting any tax liability with 7% interest rate.

        1. I’m a bit confused by your comment because 157000 will generate Rs. 10,000 in savings account if you calculate the way you said. So, 6,000 on the first lakh, and then 3,990 on the remaining 57,000 (calculated at 7%)

          If that’s the case then I’m a bit lost on where 139,000 is coming from?

          Thanks!

          1. Manshu:

            It is very simple, you will get interest on your daily closing balance but the interest will get credited only once in a quarter implying that it is quarterly compounding. Moreover as interest is going to be on daily closing balance if you have 1,20,000 in YES Bank then on first day you will get 7% on 1,20,000 for 1 day, on next day say you have 99,999 then you will get 6% on 99,999 hence this is not on the partial amount, the way you are thinking and I am sure about this 🙂

            So simple excel model will tell you that @7% daily with quarterly compounding to earn 10000 interest what should be the initial principal amount (use goal seek) and you will get 1,39,000 as break even.

            I hope this makes it clear 🙂

            1. I see what you are saying now. I thought you were earlier saying you get 7% on the additional amount over a lakh. Thanks for clarifying. Also, how are you sure this is the way they calculate? Personal experience or you read somewhere?

              1. Mansu:
                Although RBI circular says otherwise that if you have 1,25,000 as balance, upto 1,00,000 bank should pay 6% and 7% for for 25,000, it is difficult for banks to implement the differential rate approach due to system issues so all the banks, till the time system fix comes, are paying higher rate on entire amount.

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