Savings Bank Account - Definition & Meaning

Inflation, corruption, money laundering all has it impact on only one class which is none other than the Middle class. These not only increase the cost of living for individuals but also put a question mark on their future needs.  To cope up with the same, the need of the hour is to have good knowledge on the various banking products available with the banks which will help us to create a better tomorrow.

Given the current competitive environment in the Banking financial services and insurance sector (BFSI Space), it becomes very difficult for individuals to select the right product for their current and future needs. So, I in this first article of mine would like to share some of the basic products available in the market. These products would help us to save a little more than our existing savings.

Starting with the basics, let’s start off with various savings account facilities available with various banks in Indian for individuals. 

During May 2011, as mandated by the government the rate of interest provided on savings bank a/c was fixed at 4.00% per annum, due to which there was not much competition in the market. But, recently the RBI’s de-regulation of the same has created a fiery competition in the market where any bank can give the rate of interest on savings a/c as per their own math.

Appended below are the inclusive list of banks in India and the interest rate provided by them on their savings bank a/c;

Bank Name	Savings Interest Rate below  Rs. 1 Lakh	Savings  Interest Rate above Rs. 1 Lakh
Axis Bank	4% p.a.	4% p.a.
Citibank	4% p.a.	4% p.a.
HDFC Bank	4% p.a.	4% p.a.
HSBC Bank	4% p.a.	4% p.a.
ICICI Bank	4% p.a.	4% p.a.
IDBI Bank	4% p.a.	4% p.a.
IndusInd Bank	5.5% p.a.	6% p.a.
Kotak Bank	5.5% p.a.	6% p.a.
State Bank of India	4% p.a.	4% p.a.
Yes Bank	6% p.a.	7% p.a.

So, it can be said that the rate of interest now vary from 4.00% to 7.00% from bank to bank from the earlier fixed 4.00% per annum.

Further, banks have also now, introduced a new concept of sweep in/sweep out facility on your savings banks a/c, which allows you to earn maximum value for your money lying in your account. 

            Sweep in /sweep out is a facility which earns you a rate of interest equivalent to current fixed deposit interest rate prevailing in the market. This is the extra savings you will earn on your idle cash lying in your savings a/c. 

            How it works: Every individual in their savings a/c can put a pre defined limit over and above the minimum balance required. The moment the account balance exceeds the pre defined limit, the excess amount is transferred to fixed deposits (sweep in) automatically and starts earning interest as a normal fixed deposit would. Now, if the owner of the account withdraws certain amount which is higher than the available balance, the amount transferred to fixed deposit a/c is again transferred back (sweep out) to the extent required to savings bank a/c for maintenance of minimum balance. Catch: The interest earned on fixed deposit as explained above attracts TDS and the interest that would be credited to your account would be net of TDS.

The above facility is good for those, who have ample of idle cash lying in their savings bank a/c. Frequent transfer of amount from savings a/c to fixed deposit or vice versa may not be recommended.

Other benefits: Other facilities provided under savings bank a/c scheme are cheque book, International ATM cum debit card and internet banking.

Also, the interest earned on such amount in savings a/c is taxable under the income tax act, only when the interest amount exceeds Rs.10,000/- for any given financial year.

Mostly, every individual working in a public or private organisation has a salary a/c which is none other than a savings a/c. These professionals can always ask for additional facility such as sweep in/sweep out facility etc. Student and others can approach banks for opening up of a savings bank a/c and can enjoy the facilities which world help them earn that extra interest over and above existing interest income.