Following in the footsteps of India’s largest money lender, State Bank of India, other banks also have started slashing their interest rates on saving accounts owing to the rate of inflation and surplus money caused due to demonetization.
Most of the banks have changed only the interest rate offered on accounts with amounts lower than ₹1 Crore and the interest rates for accounts with balance exceeding ₹1 Crore remains unchanged so far.
The primary reason for this interest rate cut that since the real interest was very high, banks had the option to either increase the MCLR or cut down the interest rates on saving accounts and so most of them chose the latter.
Amongst others, banks like Bank of Baroda, Karnataka Bank, Axis Bank, HDFC Bank, Yes Bank have also slashed their rate of interests.
Now that due to the slashing of interest rates, savings account doesn’t seem like a decent enough option, let’s take a look at some of the other similar saving options:
Market experts expect that only the large public sector and private sector banks will compete in the race of slashing the savings interest rates whereas the smaller banks will keep their rates unchanged in order to increase their customer base. So, customers can open their bank accounts to any of these smaller banks to prevent the slashing of the interest rates affecting their savings. RBL Bank as well as Bandhan Bank, are still offering 7% interest on deposits.
Digital payment banks like India Post, Airtel and Paytm are despite the slashing of interest rates, offering lucrative interests rates on saving accounts. Airtel is offering as high as 7.25% rate of interest on deposits. Many such platforms like Jio Payments Bank, NSDL Payments Bank and FINO Payments Bank are expected to follow their footsteps. Depending upon the amount India Post Payments Bank is offering 4.5% to 5.5% interest while Paytm is offering 4% annual interest.