Small finance banks offer attractive interest rates across various forms of deposits. Interest rates of small finance banks are much higher than larger peers like State Bank of India (SBI), HDFC Bank and ICICI Bank. Interest rates of small finance banks like AU Small Finance Bank, Jana Small Finance Bank and Equitas Small Finance Bank are higher than larger peers on all three key deposit schemes – savings accounts, fixed deposit or FD accounts, and recurring deposit or RD accounts.
While mainstream banks offer a maximum interest rate of 4 per cent on savings accounts, some small finance banks offer as high as 6.75 per cent.
Why small finance banks offer higher interest rates than large lenders
Small finance banks are comparatively new in business. They offer deposit schemes to under-banked people. Door-step services and higher interest rates are some of the ways through which they try to woo customers, say experts.
However, not many people know about them and thus prefer to deposit their savings in larger banks like SBI.
But think of this: savings account interest rates of small finance banks are as good as fixed deposit or recurring deposit interest rates of large banks. This means that if you deposit money in their savings accounts, you neither need to block your money like you do in an FD account nor do you need to pay regular instalments like on RD accounts. Yet, the interest rates that you will get on savings deposits will be as good as those on FD and RD accounts.
ICICI Bank offers an FD interest rate of 6.5 per cent on a fixed deposit with tenure of 185 days to 289 days. On the other hand, Jana Small finance Bank offers the same interest rate on savings accounts.
Given below is a comparison of savings account interest rates of AU Small Finance Bank, Jana Small Finance Bank and Equitas Small Finance Bank:
Savings account interest rates of AU Small Finance Bank
On savings account balances less than Rs. 1 lakh, AU Small Finance Bank pays an interest rate of 5 per cent. On savings account balances from Rs. 1 lakh to less than Rs. 10 lakh, it pays 6.50 per cent interest. On savings account balances of Rs. 10 lakh and above, the interest rate of AU Small Finance Bank is 6.75 per cent. These interest rates are paid on an annual basis.
Savings account interest rates of Jana Small Finance Bank
Jana Small Finance Bank pays an interest rate of 6 per cent per annum on savings accounts.
Savings account interest rates of Equitas Small Finance Bank
On savings account balances up to Rs. 10 lakh, Equitas Small Finance Bank pays an interest rate of 6 per cent per annum. Savings account balances above Rs. 10 lakh and up to Rs. 5 crore, fetch an interest rate of 6.50 per cent per annum.
SBI pays an interest of 3.50 per cent per annum on saving deposits balance up to Rs. 1 crore, and 4 per cent per annum on saving deposits balance above Rs. 1 crore.
Savings account deposits in ICICI Bank fetch an interest rate of 3.5 per cent for end of day account balance below Rs. 50 lakh, and 4 per cent for end of day account balance of Rs. 50 lakh and above.
HDFC Bank pays an annual 4 per cent interest on balances of Rs. 50 lakh and above and 3.5 per cent on balances below Rs. 50 lakh.
The above interest rates are taken from banks’ websites.