IDFC First Bank Moves To Progressive Interest Rates, Still Offers 7%

IDFC First Bank, which offers the highest interest rates of 7% on savings bank account balances has now moved to a progressive interest rate regime. This is likely to benefit those who tend to hold lesser amount of balances in the account. Take a look at the interest rate offered from IDFC Bank Savings account on various balances and then we will explain, how the progressive interest rates work for IDFC Bank Savings account.

Account balance slabs	Interest rates
Less than Rs 1 crore	7%
Rs 1 crores to Rs 5 crores	5%
Rs 5 crores to 10 crores	4%
Rs 10 crores and above	3.5%

How this progressive interest rate of IDFC First Bank works?

Let's say, that you have a balance of Rs 1.5 crores in your IDFC First Savings Bank Account. The first Rs 1 crore, will attract an interest rate of 7 per cent and the remaining Rs 50 lakhs, will attract an interest rate of 5%. Say you have a balance of Rs 7 crores. The first Rs 1 crores will attract 7%, Rs 4 crores will attract 5% and the remaining Rs 2 crores will attract an interest rate of 4%.

It is therefore advisable to keep amount of less than Rs 1 crores in your IDFC First Bank Account to earn maximum interest rates.

These new rates are effective from Jan 21, 2020, and are likely to benefit those set of customers, who tend to park lesser amounts in IDFC First Bank. The bank is seeing robust growth in its savings account, given the fact that the interest rate is the highest when compared to other banks.

Even the deposit interest rates of other other banks, do not match the savings bank interest rate of IDFC First Bank. Interestingly, the interest rates on the IDFC First Bank, fixed deposits is lower than that of the savings rate it offers.

It is also interesting to note that interest income of up to Rs 10,000 is exempted from tax on a savings bank account. Also, banks do not cut TDS on savings accounts, unlike fixed deposits where there is a TDS that is applicable.

The Bank's deposits are rated as FAAA from Crisil, which is the highest rating for any instrument.

In the present scenario, where the interest rates are low, the 7% being offered by IDFC First Bank, is not a bad bet. Since it is in the savings bank account, it also remains very liquid and you can withdraw any time without a penalty. In case interest rates move higher, you can look at alternate investment options, since you are very liquid.

About the author: Sunil Fernandes has spent 26 years covering business and finance in India and abroad. Sunil has worked with frontline daily newspapers including Hindustan Times, Deccan Herald and Gulf Times. He has also worked with investment magazines like Dalal Street Investment Journal and Oman Economic Review. Sunil's areas of interest include commodities, equities, mutual funds, tax planning and debt instruments. He is currently the Managing Editor of GoodReturns