Have up to Rs 1 lakh in SBI savings account? Check rate effective from today

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Updated: November 1, 2019 4:36:18 PM

With SBI reducing the interest rate on savings account deposits, looking at alternative saving options will become necessary.

 interest rate on savings account deposits, SBI, repo rate, bank savings account rbi,Here are a few alternative avenues to keep your money liquid as well as earn a better return.

Savings Bank Interest Rate: State Bank of India (SBI) has reduced the interest rate on savings bank account deposits from today. Keeping money lying idle in your savings account will earn you lesser interest than before. Currently, this is true for banks like SBI and Bank of Baroda who have lowered the rate of interest on the savings account balance. Effective today i.e. November 1, SBI has cut the interest rate on savings account on balance up to Rs 1 lakh, from 3.5 per cent to 3.25 per cent. The balance above Rs 1 lakh will, however, continue to earn 3 per cent per annum. With SBI reducing the interest rate on savings account deposits, looking at alternative saving options will become necessary.

In the case of Bank of Baroda, the interest rate on a savings account was revised in July and it stands at 3.25 per cent on balance up to Rs 50 lakh, while on balance above that the interest rate is 3.75 per cent. In the case of other banks also, the rate stands lower. The interest rate on savings account for ICICI, revised in 2017 stands at 3.5 on balance below Rs 50 lakh and 4 per cent on balance above that limit.

In the case of SBI, the interest rate on a savings account is linked to the RBI’s repo rate on balance above Rs 1 lakh. The rate is set at 2.75 per cent below RBI repo rate, with a lower cap of 3 per cent and therefore, for balance above Rs 1 lakh, it continues to offer 3 per cent. Generally, the savings bank interest calculation is done on a daily basis on the daily closing balance in the Account and the interest is paid quarterly in March, June, September and December to the depositors.

Money lying in the bank savings account comes with high liquidity and is accessible at short notice. Therefore, most financial planners suggest keeping a portion of emergency funds in a bank savings account where funds can be withdrawn using an ATM or can be transferred online.

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With interest rate coming down, the rates of several other banks may come down from 3.5 to 4 per cent that they are offering now.

If you are looking for alternative avenues to keep your money liquid as well as earn a better return, you may consider saving through short term mutual funds. The second option is to save in liquid mutual fund schemes. Within banks, you may consider opening a sweep-in fixed deposit which comes with easy liquidity and better returns. You can withdraw any amount from such FDs while the balance continues to earn a higher rate. Alternatively, as the fourth option, you may consider opening a savings account in the post office which continues to give 4 per cent and is backed by sovereign guarantee irrespective of the balance in the account.

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