Money Saver India
Want more from your savings account?

Want more from your savings account?

Yes Bank, IndusInd and Kotak let you earn up to 3% more in interest. Find out if making the switch is for you or whether you could tweak your behaviour for the same result.

The Reserve Bank of India deregulated savings account interest rates in 2011. Until now, though, only Yes Bank, IndusInd Bank and Kotak have raised their rates from 4%. The others presumably don’t believe you will move simply because the bank next door is offering a higher interest rate. But if you are the type who simply puts off investing your savings for months together, think about making the switch, particularly if you’re already with a private bank.

Public to private: All three banks that offer higher interest rates are private banks, so if you’re dealing only with public sector banks right now, first consider if you want to maintain, on average, a monthly balance of at least Rs10,000 (it’s likely you have to maintain only Rs1,000 every quarter in your account currently). If you don’t think you can, it makes absolutely no sense to switch because the whole point of picking Yes Bank over say, Bank of Baroda, is that you should maintain a large bank balance at least some of the time for the switch to be worth it. Check how much more you’ll earn from a high-interest account below to decide if you should make the switch.

Private to private: On the other hand, if you’re already subjecting your bank account to the same minimum balance rules at a private bank like ICICI Bank or Axis Bank, it would be sensible to switch whether or not you maintain a very large balance. This is because the charges are largely the same for the basic accounts at private sector banks, while the interest rates are superior only at Yes Bank, IndusInd Bank and Kotak.

Bank Minimum balance Under Rs1 lakh Over Rs1 lakh
Yes Bank Rs10,000 6% 7%
IndusInd Bank Rs10,000 5.50% 6%
Kotak Rs10,000 5.50% 6%
Other private banks Rs10,000 4% 4%

When does it really matter? While the higher interest rate might encourage you to continue delaying your investments, it’s a good idea if you don’t see yourself changing your behaviour. Alternately, if you prefer maintaining a large balance throughout the year as a contingency fund or for any other reason, you surely should make the switch. For every Rs1 lakh that you hold in your account, you could earn an additional Rs2,000 every year. If your balance is higher than Rs1 lakh, you would earn at an even higher rate of interest.

What else to think about? Banks don’t just give you interest on your savings. If you’re very happy with the customer service and have a branch near your house, think twice about the switch. If you tend to use net or mobile banking, it may also be worthwhile to find out how good the applications are at your new bank.

Alternative Instead of making the switch to Yes Bank, IndusInd Bank or Kotak, consider simply setting up a sweep-out facility in your bank account. So long as you don’t withdraw your money within the first week, you will certainly earn a higher rate of interest than any savings account will offer you. Fixed deposit rates start at around 6.5% for 7 days, going up to as high as 9.5% for a full year. How this sweep-out facility, which is offered by all banks, works is that any time your bank balance crosses an amount set by you (say, Rs50,000), the remainder is swept into a fixed deposit.

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