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9 Best Savings Accounts That Provide Higher Returns Than FDs

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In recent months, fixed deposits are no more enticing as they appeared to be only back some time after a slew of repo rate cuts by the RBI. In reality, in recent months, some of the prominent public and private sector banks, including the State Bank of India, ICICI Bank and HDFC Bank, have cut the rates of their FDs. Considering the same in the current scenario interest rates on savings bank accounts that are provided by some small private sector banks and small finance banks are much higher than FD rates of leading private sector banks and PSU banks. That being said, the interest rates provided by small private sector banks and small finance banks on savings accounts usually vary, based on the maintained balance in the account. Currently, a significant number of PSUs and private banks provide interest rates of between 2.5% and 5.5% and up to 6% for senior citizens on their FDs, relying on the maturity period. Whereas, certain small finance banks and smaller private sector banks provide interest rates in their savings accounts of between 3 percent and 7.25 percent. Therefore, some savings accounts actually offer better interest rates than the FDs of a significant number of banks, it can well be assumed.

 

Suryoday Small Finance Bank

Suryoday Small Finance Bank

ROIBalance amount
4.00% Up to Rs 1 lakh
6.25% Above Rs 1 lakh, up to Rs 10 lakh
6.00% Above Rs 10 lakh

Utkarsh Small Finance Bank

Utkarsh Small Finance Bank

ROIBalance amount
5% Up to Rs 1 lakh
6% Above Rs 1 lakh, up to Rs 25 lakh
7.25% Above Rs 25 lakh

North East Small Finance Bank
 

North East Small Finance Bank

ROIBalance amount
5% Up to Rs 25 lakh
5.50% Above Rs 25 lakh, up to Rs 10 Cr
5.75% Above Rs 10 Cr, up to Rs 25 Cr
6% Above Rs 25 Cr, up to Rs 50 Cr
7% Above Rs 50 Cr

Jana Small Finance Bank

Jana Small Finance Bank

ROIBalance amount
4% Up to Rs 1 lakh
5% Above Rs 1 lakh, up to Rs 10 lakh
7% Above Rs 10 lakh, up to Rs 5 Cr
7.25% Above Rs 5 Cr

AU Small Finance Bank

AU Small Finance Bank

ROIBalance amount
4% Up to Rs 1 lakh
5% Above Rs 1 lakh, up to Rs 5 lakh
6% Above Rs 5 lakh, up to Rs 10 lakh
7% Above Rs 10 lakh, up to Rs 5 Cr
6.50% Above Rs 5 Cr, up to Rs 10 Cr

IDFC First Bank

IDFC First Bank

ROIBalance amount
6% Up to Rs 1 lakh
7% Above Rs 1 lakh, up to Rs 10 Cr
4.50% Above Rs 10 Cr, up to Rs 50 Cr
4% Above Rs 50 Cr, up to Rs 100 Cr
3.50% Above Rs 100 Cr

RBL Bank

RBL Bank

ROIBalance amount
4.75% Up to Rs 1 lakh
6% Above Rs 1 lakh, up to Rs 10 lakh
6.75% Above Rs 10 lakh, up to Rs 3 Cr
6.75% Above Rs 3 Cr, up to Rs 5 Cr

Bandhan Bank

Bandhan Bank

ROIBalance amount
3% Up to Rs 1 lakh
6% Above Rs 1 lakh, up to Rs 10 Cr
6.55% Above Rs 10 Cr, up to Rs 50 Cr
7.15% Above Rs 50 Cr

IndusInd Bank

IndusInd Bank

ROIBalance amount
4% Up to Rs 1 lakh
5% Above Rs 1 lakh, up to Rs 10 lakh
6% Above Rs 10 lakh

Our take

Our take

Nevertheless, there is a drawback before you hurry to deposit your hard-earned capital in these high-yield savings accounts. In certain situations, higher interest rates are provided below a certain threshold amount only on savings account balances. The returns that some small finance banks and smaller private sector banks provide on savings accounts are better than the FD interest rates provided by public sector banks and private sector banks. Such higher interest rates on savings accounts, though, are only provided below a certain threshold limit for savings account balances. Consequently, before deciding between fixed deposits and high yield savings accounts to deposit their surpluses, depositors must determine the estimated interest income from such savings accounts.

Investors must also consider that although interest rate on fixed deposits is taxable under the investor's tax slab, Section 80TTA allows for a deduction of Rs 10,000 from the savings account on interest income gained. Deposits in high return savings accounts can therefore produce good post-tax returns for those in the higher tax slabs than the fixed deposits of different banks. To enhance the significance of deposit insurance cover provided by DICGC, low-risk investors should disperse their savings account deposits through several banks providing high yield savings accounts. In the circumstance of bank default, total bank deposits (including savings, existing, fixed and recurring deposits) of up to Rs 5 lakh per customer in each bank are secured by DICGC.

Read more about: savings account
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