Up to 7% offer on savings accounts from Bandhan Bank and IDFC First Bank

The interest rates on banks' savings account and fixed deposits are determined by changes in the RBI monetary policy such as repo rate, base rate, economic conditions, liquidity position of the banks and the level of credit demand. In the December monetary policy, the Reserve Bank of India (RBI) kept benchmark interest rate unchanged at 4 per cent. For savings account holders and fixed deposit holders there is a sigh of relief as the banks may not reduce the interest rates further.

As per data compiled by BankBazaar, new private banks such as Bandhan Bank and IDFC First Bank offer interest rates up to 7.15 per cent and 7 per cent, respectively on their savings account. The interest rates are competitive with small finance banks. For instance, AU Small Finance Bank and Ujjivan Small Finance Bank offer interest rates up to 7 per cent and 6.5 per cent respectively.

These interest rates are higher compared to leading private and large public sector banks. For instance, HDFC Bank and ICICI Bank offer 3 per cent to 3.5 per cent interest on their savings account, the State Bank of India (SBI) and Bank of Baroda offer 2.70 per cent and 2.75 per cent interest respectively on their savings account.

Choose a bank with a long-term track record, good service standards, wide branch network and ATM services across cities; a higher interest on savings accounts would be a bonus.