If you thought that keeping money in bank accounts was no longer profitable, and the deposited amount has to be necessarily parked somewhere else in a bid to earn higher returns, then think again. The good news is that in a bid to woo customers and increase their customer base, some banks are still offering higher interest rates on their savings bank deposits.
For instance, Kotak Mahindra Bank is offering 6% interest on savings account balance of over Rs 1 lakh and up to Rs 1 crore, and 5% interest on balance up to Rs 1 lakh. Similarly, Bandhan Bank and Yes Bank are also offering 6% interest on bank deposits of over Rs 1 lakh, while RBL Bank is offering 6.5% for bank deposits of more than Rs 5 lakh. This despite the fact that many other leading banks, including SBI, have slashed their SB deposit rates to 3.5% for up to Rs 1 lakh. HDFC Bank is offering 3.5% interest per annum on balance up to Rs 50 lakh and 4% on bank account balance of above Rs 50 lakh.
“With the deregularization of interest rates in 2011, banks have the freedom to determine their SB interest rate. However, each bank will have to offer a uniform interest rate on savings bank deposits up to Rs 1 lakh, irrespective of the amount in the account within this limit. For savings bank deposits over Rs 1 lakh, a bank may provide differential rates of interest, if it so chooses, based on certain terms and conditions,” says Navin Chandani, CBDO, BankBazaar.com.
In fact, all financial institutions come out with a variety of schemes and plans to attract customers. With this in mind, several banks offer a higher rate of interest for the money in the SB account provided certain terms and conditions are met. For example, “a certain bank offers 6% interest for Rs 1 lakh and above maintained in the SB account. Yet, others allow you to automatically transfer surplus fund above a threshold limit from the Savings Bank Account to Term Deposits opened in multiples of Rs1000,” says Chandani.
Financial experts, however, say that regardless of the interest rates, always keep in mind that the savings account is not an investment tool. So, use it only to keep surplus funds for the short term until they are invested and keep a certain amount as emergency funds for easy access. Usually, the SB account contains approx. Rs 1 lakh on an average. In many cases, “the SB account is usually a long-standing one, and has a long history of payments and receipts. Such an account can hold a big chunk of your financial history. It is the basis of your relationship with the bank and could even have an impact on your credit history. So, handle it with care and avoid overdraws,” informs Chandani.