savings account interest rate: these banks offer an interest rate above 6% on these types of savings accounts

Like fixed deposit (FD) investors, customers of savings bank accounts have complained about very low interest rates on savings. Over the past two years, banks have reduced interest rates on savings accounts. More recently, for example, the Punjab National Bank (PNB) recently lowered interest rates on national and NRI savings accounts. According to the PNB website, the interest rate for savings accounts with a balance of less than Rs 10 lakh has been reduced to 2.8% per annum. Other major banks also offer similar interest rates on their savings accounts. At a time like this, it should be noted that few smaller financial banks are offering higher interest rates on savings accounts with balances above Rs 1 lakh. The interest rates applicable on this savings account will be on the additional balances that are present and correspond to the specified amount.

For example, Ujjivan Small Finance Bank, according to its website, offers an interest rate of 7% on savings accounts with balances above Rs 1 lakh and up to Rs 25 lakh. According to the bank, “If a client maintains Rs.120,000/- in the savings account, 4.00% interest will be earned for Rs.100,000/- and 7.00% interest will be earned for Rs. 20,000 left.”

Jana Bank states that for savings accounts with balances above Rs 1 lakh and up to Rs 10 lakh, the interest rate earned will be 6%, “6.00% will be paid on additional balances above Rs. 1 Lac and up to Rs. 10 Lacs.”

Here is an overview of the interest rates offered by small financial banks on their savings accounts.

AU Small Financial Bank

Ujjivan Small Finance Bank

Equitas Small Finance Bank

Fincare Small Corporate Bank

Suryodaya Small Finance Bank

Utkarsh Small Finance Bank

Savings account interest rates from major banks

A State Bank of India savings account now earns 2.7% per annum (as of May 31, 2020). An ICICI Bank savings account with a balance of less than Rs 50 lakh earns 3% per annum (as of June 4, 2020). A Kotak Mahindra bank (a bank whose USP has been its high interest rates on savings accounts, at one point earning 6%) savings account with a balance of up to Rs 1 lakh is now earning 3.5% per year. For balances above Rs 1 lakh, Kotak Mahindra Bank offers 4%. The Punjab National Bank recently announced a rate cut on its savings accounts.

The postal savings account currently offers 4% per annum.

Are small financial banks safe?

When a bank fails, the only respite available to the depositor is the insurance coverage offered by the DICGC. This coverage has been increased to Rs 5 lakh from Rs 1 lakh, effective 4th February 2020.

Small financial banks are directly regulated by the Reserve Bank of India (RBI), just like other big banks. This means that if a small bank fails, deposits held by customers will be up to Rs 5 lakh by the DICGC deposit insurance scheme.

The insurance coverage offered by DICGC works on deposits such as savings accounts, fixed deposits (FD), current accounts, recurring deposits (RD), etc.

In accordance with DICGC guidelines, each depositor in a bank is insured up to a maximum of Rs 5 lakh for principal and interest amounts held by him/her in the same right and capacity as at the date of liquidation/cancellation of the bank. license or the date on which the merger/merger/reconstruction regime comes into effect.

This means that all your accounts held in the same right and capacity, whether savings account or current account, FD or RD, will be clubbed and you will only get a total insurance coverage of Rs 5 lakh. This amount includes both the principal and the accrued interest amount.