Know Everything about Savings Account Interest Rate | AU Small Finance Bank
Gateway to Digital Life. Download AU 0101.
All About Savings Account Interest Rate | AU Small Finance Bank

Here’s Everything You Should Know About Savings Account Interest Rate

    Apart from being your everyday banking companion, a Savings Account is also an investment vehicle as your funds deposited in the account help you generate interest income. Using it wisely can help you maximize the returns you earn from your Savings Account.

    Here’s everything you should know about Savings Account interest rates and how you can generate higher returns.


    What is Interest?

    Interest is the money a borrower pays to the lender for borrowing money. For instance, when you take a loan from a bank, you’re required to pay interest + the principal amount.

    Generate High Interest Income

    One of the key features of a Savings Account is its interest-bearing capabilities. The amount you deposit in the account helps to generate regular interest income. Now you can open a high interest bearing AU Savings Account with us and enjoy monthly interest payouts. You can earn high interest on your AU Savings Account.

    When you open a Savings Account and deposit your savings in the account, in a way, you’re lending money to the bank. So, the interest you earn is the borrowing cost paid by the bank.


    How is the Interest on Your Savings Account Calculated?

    According to the Reserve Bank of India (RBI) guidelines, bank interest rates on Saving Accounts are calculated daily on the closing balance. However, the interest rate can vary between banks.

    For instance, if the daily closing balance is INR 3 lakhs for a month with 30 days and the interest rate is 5% per annum, here’s how the interest will be calculated-

    Interest on Savings Account = [Daily Balance x Interest Rate x (No.of Days/365)] = 300,000 x 5/100 x 30/365 = INR 1,232 interest per month

    Banks generally deposit the interest amount every quarter. However, some banks like AU Small Finance Bank offer the best Savings Account with Monthly Interest Payouts.


    Simple or Compound Interest: Which One Is It?

    Simple interest is the interest earned on the deposited amount. Compound interest is the interest you earn on the deposited amount and the interest accumulated over a period.

    Savings Accounts can generate compound interest depending on treatment of interest credited to the account. If we take the same example of the monthly interest Savings Account from above, the closing balance after one month will be INR 3,01,232 (INR 3,00,000 initial deposits + INR 1,232 interest).

    In the following month, if there are no transactions in the account, the interest will be calculated on the closing balance of INR 3,01,232, which will be INR 1,237.


    What Factors Affect Savings Bank Interest Rates?

    While banks are allowed to set their Savings Account rates, the rates are influenced by factors such as:

    Repo Rate - The repo rate is the rate at which commercial banks borrow money from the RBI. Banks are more likely to offer a higher saving deposit interest rate in a rising repo rate scenario.

    Bank Liquidity - Bank’s liquidity also influences the interest rate it offers on the Savings Account. Interest rates are generally higher if the bank has adequate liquidity.

    Profitability Preferences - A bank aiming for a higher profit margin mostly offers lower Savings Account interest rates.


    How to Maximize the Interest on Your Savings Account?

    Here are some tips to earn more interest from a Savings Account:

    Select the Right Bank - To get the best Savings Account interest rates, you must choose the best bank offering a high interest rate. AU Small Finance Bank offers high interest rate on Savings Accounts.

    Prefer Monthly Interest Deposit - Compared to quarterly interest payments, the Monthly Payout option can help you generate more interest. The Monthly Interest Payout or credit offered by AU Small Finance Bank is much higher than any other bank.

    Save More - Depositing more funds into a bank with the highest Savings Account interest rates will lead to more interest income. So, look for ways to increase your savings.

    Also Read: - Ways to Earn More Interest on Savings Account


    Tax on Savings Account Interest

    Under Section 80TTA, interest up to INR 10,000 in a financial year from all Savings Accounts is not taxable. But any amount beyond the INR 10,000 is taxed per your tax slab.

    If you’re looking for banks with the highest interest rate on Savings Accounts, you can consider AU Small Finance Bank. With high interest rate, a monthly pay-out option, and multiple Savings Accounts options, AU Small Finance Bank can help you earn more interest income while providing access to world-class banking services.

Blogs & Articles