Low-risk investors can spread their savings account deposits among several banks offering high-yield savings accounts to maximize the benefit of the deposit insurance coverage offered by DICGC, a subsidiary of RBI.
After a series of buyback rate cuts by the RBI in recent months, fixed deposits are no longer as attractive as they used to be a while ago. In fact, some of the major public and private sector banks, including the State Bank of India, ICICI Bank, and HDFC Bank, have cut FD interest rates so much in recent months that they now appear to be on par with rates. of interest offered. by many banks in their bank accounts.
Interestingly, the interest rates on savings accounts, offered by some smaller private sector banks and small financial banks, are even higher than the FD rates offered by the larger private sector banks and banks in the US. PSU. However, the interest rates on savings accounts offered by small private sector banks and small financial banks tend to vary, depending on the balance held in them.
Banking experts say that a large number of USPs and private banks currently offer interest rates of between 2.5% and 5.5% on their fixed deposits, depending on the investment tenure, and up to 6% for old people. On the other hand, some small financial banks and smaller private sector banks are offering interest rates of between 3 and 7.25 percent on their savings accounts. Thus, it can well be said that some savings accounts currently offer higher interest rates than the DFs of a large number of banks.
However, before you rush to put your hard-earned money into these high-yield savings accounts, there’s a problem. In most cases, higher interest rates are offered only for savings account balances within a certain limit.
“The interest rates offered on savings accounts by some small financial banks and smaller private sector banks are higher than the FD interest rates offered by public sector banks and major private sector banks. However, these higher interest rates on savings accounts are only offered on savings account balances within a certain limit. Therefore, depositors should calculate the average interest income of these savings accounts before choosing between fixed deposits and high-yield savings accounts to park their surpluses, ”says Sahil Arora, Director of Paisabazaar.com.
Depositors should also remember that while interest income from fixed deposits is taxable according to the investor’s tax table, Section 80TTA provides a deduction of Rs 10,000 on interest income earned from the savings account.
Therefore, deposits in high-yield savings accounts can generate higher after-tax returns than fixed deposits from various banks for those at the higher tax levels.
“Low-risk investors can spread their savings account deposits among various banks offering high-yield savings accounts to maximize the benefit of the deposit insurance coverage offered by DICGC, a subsidiary of RBI. Under the deposit insurance program, cumulative bank deposits (including savings, current, fixed and recurring deposits) of up to Rs 5 lakh per customer at each bank are protected, in the event of bank failure, ”says Arora.
Whatever the case, if you are interested in putting your money in high-yield savings accounts, here are some of them:
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