What is Savings Account Interest Rate?
A Savings Account interest rate refers to the percentage of interest that a bank pays for the amount deposited in the Savings Account. In your Savings Account, you can deposit and withdraw funds, at any time. Therefore, you will keep earning interest so long you have funds in the account.
If you have a Domestic Savings Account, Non-Resident External (NRE) Savings Account and Non-Resident Ordinary (NRO) Savings Account with HDFC Bank, you can expect a 3.00% per annum for a Savings Account balance of less than ₹50 lakh. For a balance amount of ₹50 lakh or more, you can get an interest rate of 3.50% per annum.
If you hold a Resident Foreign Currency (RFC) Savings Account with HDFC Bank, you can earn 0.01% interest on your GBP and USD currency balances. RFC Accounts allow returning Non-Resident Indians (NRIs) to deposit and retain their foreign currencies, which otherwise is not permitted in domestic accounts.
Note that these interest rates are subject to change per the bank’s sole discretion. The accumulated interest amount is deposited in your account on a quarterly basis. Additionally, the interest you earn is subject to compounding every quarter.
How is the interest on Savings Account calculated?
The interest on your Savings Account is calculated based on the daily closing balance in your account, per the Reserve Bank of India (RBI) regulations.
Generally, you tend to make frequent withdrawals and deposits in your Savings Bank Account throughout the month, resulting in a fluctuating account balance. Your account balance is typically high at the beginning of the month due to salary credit. As the month progresses, you may withdraw funds to pay your rent, settle your bills, buy groceries, and fulfil other monthly obligations. Doing so leads to a variation in your account balance. On the other hand, if you have made investments, you may receive monthly payouts that drive the balance up again.
The formula for calculating the interest on a Savings Account is as follows:
Savings Account interest = Daily account balance x Savings Account interest rate x No. of days/365 (Days in a year).
For instance, if your account balance today is ₹50,000 and interest rate is 3.00%, then your interest earned for one day will be:
50,000 x (3.00/100) x (1/365) = ₹4
If you maintain ₹50,000 for 30 days, the interest earned after 30 days will be 50,000 x (3.00/100) x (30/365) = ₹123.28. TDS as per applicable rates gets deducted in case of NRO/RFC account.
