Accordingly, there were many banks that began offering higher interest rates, which were around 4% before they were freed.
A list of banks that offer highest rates on Savings Bank Accounts
Yes Bank - 6 per cent
Kotak Mahindra - 6 per cent
IndusInd Bank - 5.50 per cent
Other banks - 4 per cent
Not advisable to keep large balances
It's not advisable to keep large balances in your savings bank account, even if they do offer a high SB interest rate of 6%. This is simply because you can keep the money in a Bank Fixed Deposit which offers higher interest rates then a savings bank account.
Most of the banks currently offer 4 per cent interest rate, but, there are other benefits that come with these slightly lower rates. For example, you would have to maintain a lower quarterly average balance. Banks that offer higher interest rates on SB accounts want to you to maintain a higher average quarterly balance in the SB account, which you might as well keep in a FD.
Say you have to maintain an average quarterly balance of Rs 10,000-20,000 to receive the higher interest on SB account. Instead of maintaining a high balance you could keep just Rs 1000 with a public sector bank and move the remaining money into a bank FD which offers higher rates.
It may be recalled that in the Union Budget of 2012-2013, the then Finance Minister had announced that interest income from savings bank accounts to the tune of Rs 10,000 would be exempted from tax. This means that any interest income to the tune of Rs 10,000 that you get from a savings banks account would not be added to total income.