In today’s world, people save their hard-earned money in a savings account, and the choice of investment options makes a significant difference. The savings account is a place where it can be stored for short-term growth.
However, understanding how saving account interest rates works is essential. This knowledge will give you an informed decision about where to put your hard-earned money. In this blog, we’ll explore the different banks’ interests to maximize the value of your savings rate.
List of Top Banks Saving Accounts for Interest Rate:
Look at Top Banks’ savings accounts for interest rates. It will give you a comprehensive comparison to help you make informed decisions.
| S. No | Bank Name | Rate of Interest (% p.a.) |
| 1 | Ujjivan Small Finance | 3.50% to 7.50% |
| 2 | RBL Bank | 3.75% to 7.50% |
| 3 | Utkarsh Small Finance Bank Limited | 4.00% to 7.50% |
| 4 | Suryoday Small Finance Bank Limited | 3.00% to 7.50% |
| 5 | ESAF Small Finance Bank Limited | 3.50% to 7.50% |
| 6 | AU Small Finance Bank Limited | 3.00% to 7.25% |
| 7 | Digibank by DBS | 3.25% to 7% |
| 8 | IDFC Bank | 3.00% to 7% |
| 9 | Yes Bank | 4.00% to 7.00% |
| 10 | Equitas Small Finance Bank Limited | 3.50% to 7.00% |
| 11 | IndusInd Bank | 3.50% to 6.75% |
| 12 | Bandhan Bank | 3.00% to 6.00% |
| 13 | Jana Small Finance Bank Limited | 3.50% to 5.00% |
| 14 | Kotak Mahindra Bank | 3.50% to 4% |
| 15 | ICICI Bank | 3.00% to 3.50% |
| 16 | HDFC Bank | 3.00% to 3.50% |
| 17 | Bank of Baroda | 2.75% – 3.35% |
| 18 | Axis Bank | 3.00% |
| 19 | State Bank of India | 2.70% – 3.00% |
| 20 | Canara Bank | 2.90% |
| 21 | Union Bank of India | 2.75% |
| 22 | Bank of India | 2.75% – 2.90% |
| 23 | Karnataka Gramin Bank | 2.00% to 2.90% |
A Brief Overview of Savings Accounts
Saving accounts are the safest and most secure investment choice for effective financial planning. It is a safe place to put your hard-earned money for earning interest. These platforms can be ideal for short-term returns with high equity. Here are some things to consider before opening a savings account:
- Compare interest rates to maximize savings over time.
- Examine fees and charges to minimize costs and protect savings growth.
- Evaluate bank accessibility, including physical locations and online services.
- Consider account features and how they align with your savings goals.
How is the savings account interest calculated?
Have you noticed how the saving account interest rate is calculated? It is simple, Savings account interest is usually calculated using a method called compound interest. This means you earn interest not just on your initial deposit, but also on the interest you’ve already earned. Here’s a simplified explanation:
Daily calculation: Most banks calculate interest daily.
Monthly or quarterly payment: Though calculated daily, interest is often paid monthly or quarterly.
Annual Percentage Yield (APY): This is the rate you see advertised, which includes the effect of compounding.
- Let’s say you have ₹1,00,000 in a savings account with a 4% APY
- Daily interest calculation: 4% ÷ 365 days = 0.01096% per day ₹1,00,000 x 0.01096% = ₹10.96 per day
- After one month (assuming 30 days): ₹10.96 x 30 = ₹328.80 in interest
- New balance after one month: ₹1,00,000 + ₹328.80 = ₹1,00,328.80
- Next month’s calculation starts with ₹1,00,328.80, so you’ll earn slightly more.
- After a year, you’d have about ₹1,04,074, which is ₹4,074 more than your initial deposit.
Here the Detailed view is shown in the table, Interest is calculated monthly and Each month is treated as having 30 days.
| Month | Starting Balance | Interest Earned | Ending Balance |
| 1 | ₹1,00,000.00 | ₹328.80 | ₹1,00,328.80 |
| 2 | ₹1,00,328.80 | ₹329.88 | ₹1,00,658.68 |
| 3 | ₹1,00,658.68 | ₹330.97 | ₹1,00,989.65 |
| 4 | ₹1,00,989.65 | ₹332.06 | ₹1,01,321.71 |
| 5 | ₹1,01,321.71 | ₹333.15 | ₹1,01,654.86 |
| 6 | ₹1,01,654.86 | ₹334.25 | ₹1,01,989.11 |
| 7 | ₹1,01,989.11 | ₹335.35 | ₹1,02,324.46 |
| 8 | ₹1,02,324.46 | ₹336.46 | ₹1,02,660.92 |
| 9 | ₹1,02,660.92 | ₹337.57 | ₹1,02,998.49 |
| 10 | ₹1,02,998.49 | ₹338.69 | ₹1,03,337.18 |
| 11 | ₹1,03,337.18 | ₹339.81 | ₹1,03,676.99 |
| 12 | ₹1,03,676.99 | ₹340.94 | ₹1,04,017.93 |
Final balance after one year: ₹1,04,017.93
Total interest earned: ₹4,017.93
How does TDS act on saving account interest rate?
TDS takes a portion of your income and deducts at the source, the government collects taxes through Tax Deducted at Source (TDS). The interest you earn on savings accounts is not subject to TDS deductions by banks. Savings account income is categorized as “Income from Other Sources,” and you are required to report it on your IT returns. The Income Tax Act’s Section 80TTA exempts from taxation interest payments up to ₹10,000 in a single year. Under Section 80TTB, the upper limit is ₹50,000 for senior folks.
The additional money you make over these caps, though, is considered income and is deductible from taxes. For example, If you earn ₹15,000 interest from your savings account. After the ₹10,000 reduction under Section 80TTA, only ₹5,000 will be taxable.
How is peer-to-peer (P2P) preferable to savings accounts?
While traditional savings accounts offer a stable and secure way to grow your money, some investors are turning to alternative options like peer-to-peer (P2P) lending for potentially higher returns. P2P lending platforms connect individual borrowers with lenders, cutting out the middleman typically found in traditional banking.
P2P lending companies such as Monexo offer a better return of up to 13% than a savings account. See the table below for a complete comparison.
| Feature | Monexo | Savings Account |
| Typical Annual Returns | Up to13% | Usually 2-7% |
| Risk Level | Moderate | Low |
| Liquidity | Moderate | High |
| Minimum Investment | ₹10,000 | ₹0 – ₹1,000 |
| Insurance | Not insured | Insured up to ₹5 lakhs by DICGC |
| Control over investments | High | Low |
| Interest Compounding | Often monthly | Usually quarterly |
| Diversification Potential | High | Low |
| Loan Terms | 3 months to 3 years typically | N/A |
Let’s assume an investment of ₹1,00,000 for one year:
P2P Lending:
Average return: 13% per annum
Potential earnings: ₹13,000
Savings Account:
Average interest rate: 3.5% per annum
Potential earnings: ₹3,500
This example illustrates the potential for higher returns with P2P lending. However, it’s crucial to remember that P2P lending carries risks, including the possibility of borrower defaults.
Conclusion:
In the constantly shifting world of investments, it’s essential to remain knowledgeable and proactive. You can observe your investment appreciation through careful evaluation of the available choices and smart decision-making. So why hold off? Invest your money and let the returns take care of the difficult lifting!
