For instance, Ujjivan Small Finance Bank, according to its website, is offering 7% interest rate on savings accounts with balances above Rs 1 lakh and up to Rs 25 lakh. According to the bank, “If a customer maintains Rs.120,000/- in the savings account, 4.00% interest will be earned for Rs.100,000/- and 7.00% interest will be earned for the remaining Rs.20,000.”
Jana Bank states that for savings accounts with balances above Rs 1 lakh and up to Rs 10 lakh, the interest rate earned will be 6%, “6.00% will be paid on incremental balances above Rs. 1 Lac & up to Rs. 10 Lacs.”
Here is a look at the interest rates offered by the small finance banks on their savings accounts.
AU Small Finance Bank
Ujjivan Small Finance Bank
Equitas Small Finance Bank
Fincare Small Finance Bank
Suryodaya Small Finance Bank
Utkarsh Small Finance Bank
Savings account interest rates of bigger banks
A State Bank of India savings account now earns 2.7 per cent per annum (with effect from May 31, 2020). An ICICI Bank savings account with a balance of less than Rs 50 lakh earns 3 per cent per annum (with effect from June 4, 2020). A Kotak Mahindra Bank (a bank whose USP has been its high interest rates on savings accounts, at one point earning 6 per cent) savings account with balance up to Rs 1 lakh now earns 3.5 per cent a year. For balances above Rs 1 lakh, Kotak Mahindra Bank is offering 4 per cent. Punjab National Bank recently announced a reduction in its savings account rates.
Post office savings account is currently offering 4% per annum.
Are small finance banks safe?
When a bank fails, the only respite a depositor has is the insurance cover offered by the DICGC. This cover was raised to Rs 5 lakh from Rs 1 lakh, effective from February 4, 2020.
Small finance banks are directly regulated by the Reserve Bank of India (RBI), just like other big banks. What means is that if a small bank fails, the deposits held by customers will be up to Rs 5 lakh by the DICGC’s deposit insurance plan.
The insurance cover offered by DICGC works on deposits such as savings accounts, fixed deposits (FD), current accounts, recurring deposits (RD), etc.
As per the DICGC guidelines, each depositor in a bank is insured up to a maximum of Rs 5 lakh for both principal and interest amounts held by her/him in the same right and same capacity as on the date of liquidation/cancellation of the bank’s license or the date on which the scheme of amalgamation/merger/reconstruction comes into force.
What this means is that all your accounts held in the same right and capacity whether savings or current account, FD or RD, will be clubbed and you will get only a total insurance cover of Rs 5 lakh. This amount includes both principal and the accumulated interest amount.