Last Updated – 28 April 2019
Which bank gives the highest interest rate on a savings account?
SBI saving account interest rate is 3.50% only.
Kotak Bank shows me 6%.
Yes Bank offers 7.1 reduced to 6%.
Do you really get that much?
Then which is the best saving account?
Let’s compare the savings accounts:
Not exactly! We are not comparing savings account interest rates but best interest rates.
Some of the private banks started offering more interest rate on the regular saving account after RBI deregulated interest rates.
I will tell you how banks are fooling people with marketing…
.. when you can still earn more than 7% interest with any bank saving account (And it is no more a secret).
You guessed it right, high yield savings account.
Look at the * condition of Kotak Bank
Yesbank updated their conditions and now giving 6% to everyone with deposits less than 1Cr.
Note Kotak Bank will never give you promised 6% interest. Effective interest earned on savings account in above example less than 6%.
Tell me who keeps 5 Cr in saving account? No one!!
Then, where is the best saving account interest rate?
You can check out best saving bank account in India
Where is the secret of earning more than 7% savings account interest rate?
Here! You can convert your saving accounts into a high interest yielding savings accounts by:
Option 1: Deposit in FD
You can open Fixed Deposit with any bank, earning interest between 8.5% to 9.5% 7.5% (updated in Nov 2016).
Well, you already know this option. Your money will be locked for the tenure of FD and you may need this money anytime. You don’t want your money to be locked by your bank, right?
Option 2: Auto Sweep-in / Sweep-out saving account
Sweep-in accounts are saving accounts which give extra benefit of fixed deposit. Many banks offer auto sweep saving accounts with different names.
- ICICI Bank Money Multiplier
- SBI Saving Plus Account
- HDFC SavingsMax Account
- PNB Prudent Facility
- Union Bank – Union Flexi Deposit
- Oriental Bank of Commerce – Flexi Fixed Deposit
- Allahabad Bank Flexi-fix Deposit
- Axis Bank Encash 24 Flexi Deposits
How does sweep account work?
Banks set minimum amount (10,000 to 25,000) which earn 4% interest. Any amount over the threshold limit will automatically convert into small fixed deposits in multiple of 1000 or 5000 depending upon the bank.
You can withdraw amount by ATM or Cheque as regular transactions. Your fixed deposits will automatically be liquidated when your amount goes below the threshold limit. Banks break FD automatically in a First-In-First-Out or Last-In-Last-Out manner.
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Option 3: Manual sweep-in facility with regular Fixed Deposit
You can select a sweep-in option when opening regular FD. Almost all banks provide this facility.
Some banks allow you to convert your regular FD into sweep-in accounts, like HDFC.
Disadvantages
- You have to pay the penalty on interest if you are utilizing funds over the limit. Normally 0.5 to 1%, but 8% is still better than 7%.
- You have to open and break fixed deposits in case of manual sweep-in. Some effort but worth for earning more money. You can open auto sweep-in FDs to avoid the hassle.
- The amount under threshold limit earns only 4% interest. You can choose a bank with a minimum threshold limit (most of the public banks).
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Conclusion
Savings account interest rates can be made high-interest savings accounts.
Select threshold limit equal to your 2 months expenses so that you can avoid sweep-out penalty. I am sure you will earn a higher interest rate and some extra money with this smart move.
Great pardeep sir. Thank you for your valuable article 🙂
Hello, thank you for the wonderful article.
I am a college student so I don’t have much money but would like to save the little bit I have and get an interest on the same.
Could you advice me which option should I go for?
It’s okay if I can’t withdraw money for a year. But the amount I have is not much.
Please help. Thanks.
Very nice and valuable information. Thanks
Thanks for your value information.
Very useful and calculative.
Hi Mr.Pardeep…. thanks for enlightening about sweep in account…which we are not aware of till this day… I have 3lcs.. not shown in accounts so far… after reading this article I am going to check with my bank about sweep-in-SB account.. if there is no facility with present account, can I open a new SB account and go for this sweep-in account ?.. what happens after accumulating a big amount without showing in income tax accounts ?
Pay your income taxes! Why to take a chance?
And most of banks offer sweep-in facility, or switch to good bank 🙂
Very good inf.!
To earn higher return I think FD is best choice.
But I steel not understand why only yes bank and kotek provides higher interest on saving account not any other bank.
Dear pardeep. Plead tell me if digibank is OK for opening a saving account. It is offering 7% interest rate on deposits. Actually this is not an Indian bank. This is a bank of Singapore and compeletly digital.
Pl also tell me if we can earn money by making apps and if so, how.
I have been using it for more than 6 months. It’s as reliable as any other banks in India. It’s backed by RBI and DBS
Looks like citibank doesn’t have good options here.
They have the something like manual sweep in but that is giving 5.75% interest rates only (6% for higher number of days which is risky).
Hi Mr.Pradeep,
I just read your article about sweep concept.
I have a doubt regarding sweep option. Both FD and Sweep account work like same or different.
If i use lump sum amount of 1L is maintained in one bank will yield more interest ?
I am little confused and hoping that you could resolve the confusion:
My friend has a zero balance account in Yes Bank and he has set an auto sweep with 0 threshold limit. So, he says that effectively he has a savings account which gives FD interest. Even if he withdraws money, there is no penalty whatsoever.
But I feel something is hidden as this seems impossible to me:
Without any penalty, why do Yes bank have a savings account in the first place then. Why not everyone opens an auto sweep FD and earns the FD interest?
sweep in FDs are opened in chunks of small amount, say 1000 rupees. That is not visible to the customer but internal to the bank. So when you deposit 100,000 rupees in sweep in account, it becomes 100 FDs of 1000 rupees each. When you withdraw 10,000 then you left with 90 FDs of 1000 rupees each. Banks have another clause of number of days, again internal to bank, when they consider your amount into FD.
I just took example of amount to explain the concept. It may vary with bank to bank.
Just understand that you will get more interest than regular saving account 🙂
Thanks alot for info. Very helpful for me.
Sweep-In FD is a time deposit, the interest from which will be treated the same way as interest from another regular FD. It is just that this fixed deposit is created automatically. The interest earned on fixed deposit will be added to your income under the head ‘Income from other sources’ and taxed as per your slab rate. As it is a term deposit, Section 80TTA is not applicable to Sweep-In FD. Section 80TTA is applicable only to your savings account where interest income upto Rs10,000 earned during a financial year can be claimed as exemption.
Your understanding is right. Sweep-in FDs are like regular FDs except that these are opened automatically when you deposit amount in your saving account.
In this context, Could you please do a review Reliance liquid fund account that comes with a debit card ? Liquid funds also could fetch 7% quite easily and the associated card is now a game changer.
Liquid funds work differently than FDs. Most of people don’t have demat accounts, so the article is focused on bank accounts only.
Hi pardeep,
I’m getting salary of 13k per month.I wanna save 50%of it.Can u please suggest me the bank which helps me to save more and get more.
Make Recurring deposit in any bank. I prefer ICICI but other banks also have option of RD.
Hi pradeep, I’m getting salary of 13k per month.I wanna save 50% of it in bank . Can you please suggest me the bank with highest interest rates. How the calculations will be done
liquid funds gives more than 8% without any charges. Better go to Liquid funds.
Hi, Good article but could you please mention that, why it is 7.1% in your first line. as bank describes 7%. And how did 6.44% calculation came. Thanks
If the idea behind to post is maximise savings account interest (essentially get more interest than your SB 4%) then stating that banks like Kotak/Yes are fooling is misleading. if you ignore the fine print for a while. Yes Bank gives 6% interest for any money in savings account vs 4% in most of the banks. That is 50% more interest than your usual account. And we have till 10000 savings interest exempt. For a simple example, of Rs 1 Lakh in savings account will fetch you Rs 6000 vs Rs 4000 is a case in itself.
Taking the options of FD combinations, if you observe the interest rates Yes Bank has higher interest rates than your other regular banks with 4% SB.
I do agree sweep in is good but for smaller amounts the taxation will negate the gains and pain of accounting the same in tax filing.
Hi Vijay,
Your calculations are correct when you say that YesBank will give you 6000 vs 4000 on 1L savings, but I am saying not to keep those 1L in your saving account but lock into FDs (or sweep account). In that case you will get ~9% before tax and 8% after tax deduction (10% tax). You will end up saving 8000 rather than 6000.
I understand it is a little hassle but if you are planning your financials then its not more than 5 minutes work. I guess this time is worth 2000 rupees. Banks allure us with free movie tickets (worth 500) and we forget that we are leaving 2000 rupee on the table (just 5 minutes… 2000 rupees).
Hi pradeep, a quick question, so if i put 900000 in sweep acc. How much am i likely to have it annual interest over it?
The annual interest will be same as interest on regular FD of bank. Check with the bank.
It was really nice article. It is very informative. Keep it up Pardeep.
All the Best.
Thanks Chandan. I am glad you liked it.
Thanks Amitesh. Most of the businesses gave hidden agenda behind their offers, including banks. We should take conscious decision before buying or investing.
Nice article!!