Saving money is simple — earning a good return on it isn’t. In India, savings-account interest rates vary widely: large national banks generally pay modest rates (2.5–3.5% p.a.), while small-finance banks and niche private banks often offer much higher tiered rates (sometimes 6–8% p.a.) for customers who maintain larger balances or meet specific conditions. Below I explain why that happens, list the banks currently offering the highest effective savings yields, show how their tiered slabs work, and give practical tips for choosing the right account for your needs.
Why some banks pay much higher savings rates
- Business model: Small finance banks (SFBs) and newer private banks aggressively price deposit rates to attract funds and grow. They use higher retail deposit rates to build low-cost, stable deposit bases.
- Tiered slabs: Many banks pay different rates on different balance slabs (for example: up to ₹1 lakh, ₹1–5 lakh, ₹5–10 lakh, above ₹10 lakh). The headline “up to X%” often applies to higher slabs only.
- Frequency & compounding: Monthly interest credit compounds faster than quarterly — check frequency.
- Safety: All scheduled banks in India are covered up to ₹5 lakh per depositor per bank by DICGC, but large amounts above that carry concentration risk.
(Sources: individual bank rate pages cited below.)
Top banks (and what they actually pay) — quick snapshot
Below are banks that — as of early 2026 — advertise the most competitive savings-account returns in India. For each I’ve included the effective headline rate and how that rate is typically applied.
- Equitas Small Finance Bank — Up to 7.00% p.a. (Equitas advertises savings returns up to 7% on select products / high balance slabs).
- Suryoday Small Finance Bank — Up to 7.75% p.a. on the highest balance slabs; lower slabs pay much less (e.g., 2.5–3%). Check the exact slab schedule.
- AU Small Finance Bank — Up to ~6.50% p.a. on selected savings products / slabs with monthly interest credit.
- IDFC FIRST Bank — Up to ~6.50% p.a. on some savings account variants; monthly interest credit is common.
- DCB Bank — advertises competitive slab rates (some slabs reach higher levels depending on product). Always check DCB’s slab PDF for exact incremental rates.
- Jana Small Finance Bank — slabbed rates where incremental balances above certain thresholds attract higher interest (examples shown on their published slab notice).
- ESAF Small Finance Bank — some savings slabs show elevated rates (check latest slab table for resident and NRE/NRO distinctions).
- State Bank of India — Typically ~2.50% p.a. (standard across retail savings products after recent rate adjustments). Large national banks generally remain in the lower band.
Important: the “up to” rate almost always applies only to specific products or to very high balance slabs (sometimes ₹10 lakh or more). Small balances (e.g., under ₹1 lakh) usually earn the much lower base rate — often in the 2.5–3.5% zone for mainstream banks.
How slabbed interest works — a short example
Banks commonly use incremental or average daily balance calculations. Suppose a bank’s slabs are:
- Up to ₹1 lakh → 2.5%
- ₹1 lakh–₹5 lakh → 3.5% on the incremental amount
- ₹5 lakh–₹10 lakh → 6.25% on the incremental amount
If you have ₹6 lakh, you won’t get 6.25% on the entire ₹6 lakh — you’ll get 2.5% on first ₹1 lakh, 3.5% on next ₹4 lakh, and 6.25% on the final ₹1 lakh. Always check whether the bank pays on entire balance or incremental balance (banks differ).
Estimated Annual Interest Earnings (₹)
1) ₹1.5 Lakh Balance
| Bank | Assumed Slabs | Effective Rate | Interest Earned / Year |
|---|---|---|---|
| IDFC FIRST Bank | 3% to ₹5 L; 7% beyond | 4.60% | ₹6,900 |
| AU Small Finance Bank | 2.5–2.75% low; 3.5% above ₹5L | 2.85% | ₹4,275 |
| Slice Small Finance Bank | flat 5.5% | 5.50% | ₹8,250 |
| SBI | 2.50–2.70% uniform | 2.60% | ₹3,900 |
| HDFC Bank | 2.50% flat | 2.50% | ₹3,750 |
Takeaway: At ₹1.5 L, Slice SFB is strongest due to a uniform high rate, followed by IDFC FIRST Bank. SBI and HDFC remain modest.
2) ₹7 Lakh Balance
| Bank | Assumed Slabs | Effective Rate | Interest Earned / Year |
|---|---|---|---|
| IDFC FIRST Bank | 3% up to ₹5L; 7% on rest | 5.50% | ₹38,500 |
| AU Small Finance Bank | 3.5% below ₹5L; 6.5% above | 5.70% | ₹39,900 |
| Slice Small Finance Bank | 5.5% flat | 5.50% | ₹38,500 |
| SBI | 2.60% uniform | 2.60% | ₹18,200 |
| HDFC Bank | 2.50% uniform | 2.50% | ₹17,500 |
Takeaway: For ₹7 L, AU SFB and IDFC FIRST Bank edge ahead thanks to high incremental rates on larger balances.
3) ₹25 Lakh Balance
| Bank | Assumed Slabs | Effective Rate | Interest Earned / Year |
|---|---|---|---|
| IDFC FIRST Bank | High slab mostly (7%) | 6.80% | ₹170,000 |
| AU Small Finance Bank | 6.50% once above ₹10L | 6.20% | ₹155,000 |
| Slice Small Finance Bank | 5.50% flat | 5.50% | ₹137,500 |
| SBI | 2.60% uniform | 2.60% | ₹65,000 |
| HDFC Bank | 2.50% uniform | 2.50% | ₹62,500 |
Takeaway: At larger balances, IDFC FIRST Bank stands out with higher top-tier rates if most funds sit in high slabs, followed closely by AU SFB.
Risks & practical considerations
- Check the minimum balance condition. Some higher rates require maintaining a minimum monthly/quarterly balance or using a specific variant (digital-only vs regular).
- Interest credit frequency. Monthly credit compounds faster; quarterly is slower. Prefer monthly if compounding matters.
- Fine print: Some rates are promotional or apply to new customers only. Read the “effective from” and “applicable to” lines on the bank’s rate PDF.
- Deposit insurance limit: DICGC covers ₹5 lakh per depositor per bank — for balances above that, diversification across banks reduces concentration risk.
- Rate revisions: Banks revise rates with market/RBI moves — check the bank’s official interest-rate page before opening an account. (RBI policy direction influences retail rates.)
How to pick the best savings account for you
- If your balance is small (<₹1 lakh): mainstream banks (SBI, HDFC, ICICI) will offer similar base rates; prioritize service, branch/ATM network, and app quality rather than marginal interest differences.
- If you hold ₹1–10 lakh: compare slab-by-slab rates — a small-finance bank’s higher top slab can materially boost overall yield if much of your balance sits in the higher slabs. Use a simple spreadsheet to compute weighted interest across slabs.
- If you hold >₹10 lakh: small-finance banks and specialized high-yield savings products can significantly outperform mainstream banks — but diversify to keep amounts within the DICGC limit per bank.
- Look at liquidity & conditions: some high-yield accounts may impose limits on withdrawals or require linked investments; check the fine print.
Quick checklist before opening an account
- Official bank rate page PDF (download & save).
- Minimum average balance requirement and fees.
- Interest-credit frequency (monthly vs quarterly).
- Slab application method (entire balance vs incremental).
- Promotional terms (new-customer limits, tenure, etc.).
- DICGC exposure — split large sums across multiple banks.
Small-finance banks and certain private banks currently offer the highest headline savings rates in India (some slabs up to ~7–7.75% p.a.), but those top rates almost always apply to higher balance slabs and specific account variants. For most savers with modest balances, the effective yield will be lower — so do the slab math before switching.
Rajil M P is a seasoned banking professional with over eight years of experience in the Indian banking sector. He has successfully completed the JAIIB and CAIIB examinations conducted by the Indian Institute of Banking & Finance (IIBF), reflecting his strong academic foundation and practical expertise in banking, finance, and risk management. He is the founder and editor of IndianBanker.com, a trusted platform focused on banking news, exam preparation, financial updates, and practical tools for banking aspirants, professionals, and informed readers. Drawing from real-world banking experience, Rajil simplifies complex topics such as interest rates, loans, deposits, RBI policies, and government schemes, making them easy to understand and apply.
Discover more from Indian Banker
Subscribe to get the latest posts sent to your email.
