Savings are generally funds that you set aside to meet your near future needs. Most of the financial adviser will ask you to keep at least six months average monthly expenditure in saving bank account for sudden emergency or exigency.
What is a Savings Bank Account?
A savings bank account is an interest-bearing deposit account held at a bank or other financial institution that provides a modest interest rate. Financial institutions that offer savings accounts may limit the number of withdrawals from an account each month. They also may charge fees unless you maintain a certain average monthly balance in the account.
Most of the financial adviser will ask you to keep at least six months average monthly expenditure in saving bank account for sudden emergency or exigency. One of the most important features of savings bank account is that these can be accessed relatively quickly. The most universal way of saving is in to a bank account (‘savings’ account) where the money is available to you on demand.
Top Features of Saving Bank Accounts
| Eligibility | Adult individuals, singly or jointly with other adults, Minors, who have attained 10 years of age. Trusts, Societies and other organizations approved by RBI |
| Requirements |
Introduction by an account holder having a satisfactory account with the bank for at least six months. One of the following as proof of identity and proof of address :
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| Minimum amount | Rs 100/- to Rs 10,000/-. |
| Maximum amount |
No Limit |
| Interest Rate | The saving Bank interest for resident in Indians has been de-regulated from 25th October 2011. Earlier, the saving bank interest rates were regulated by RBI and were therefore same in all banks. Now, the Savings Bank Interest Rate varies from bank to bank. Many banks are offering higher interest rates on Saving Bank accounts (up to 7% as against 3.5% earlier). |
| Nomination facility | Available |
| Tax of Interest |
Interest up to Rs 10,000/- for individuals & HUFs is exempt from income tax w.e.f 1st April 2012 ( for Assessment Year 2013-14) under section 80 TTA. |
| Other features |
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Advantages of Savings Bank Account
Because savings accounts pay interest, it is more beneficial to keep your unneeded funds in a savings account than in a checking account so your money can grow. Benefit of saving account can be checked by using Saving Bank Account Calculator. Keeping cash elsewhere that you don’t plan to spend in the immediate future is unsafe, and using a savings account has a psychological benefit: It’s tempting to spend money in hand. While savings accounts facilitate saving, they also make it very easy to access your funds.
Other advantages of saving account are as follows:
- Safety: A savings account holds your money in a safe place: your bank or other financial institutions.
- Growth: Savings accounts pay interest on money in your account. As a result, your bank will make small additions to your account, typically every month.
- Saving account encourages savings habit among salary earners and others who have fixed income.
- Saving account helps the depositor to make payment by way of issuing cheques.
- Saving account passbook acts as an identity and residential proof of the account holder.
- It provides a facility such as Electronic fund transfer (EFT) to other people’s accounts.
- It helps to do online shopping via facility like internet banking.
- It aids to keep records of all online transactions carried on by the account holder.
- It provides immediate funds as and when required through ATM.
- The bank offers number of services to the saving account holders.
Disadvantages of Savings Bank Account
While the liquidity of a savings account is one of its key benefits, its ready availability of funds could tempt you to spend them. That immediate availability comes at a price, however, as savings accounts usually pay lower interest rates than Treasury bills and certificates of deposit. As a result, they should not be used for long-term holding periods.
While savings accounts typically are free, there are limitations and potential costs. Accounts generally have minimum balances they require you to maintain. Banks often will charge a monthly fee, an annual fee, or both if you do not maintain this minimum balance. The fees will be withdrawn from your account, so there is a possibility you also could be charged overdraft fees if the account balance goes below zero.
Savings Account Interest Rates
The saving Bank account interest for resident in Indians has been de-regulated from 25th October 2011. Earlier, the saving bank interest rates were regulated by RBI and were therefore same in all banks. Now, the Savings Bank Interest Rate varies from bank to bank. Many banks are offering higher interest rates on Saving Bank accounts (upto 7% as against 3.5% earlier).
The interest rates earned on a savings account are determined based on the minimum average balance maintained in the account. The rate of interest offered on the balance in a savings account varies from bank to bank.
Saving bank account interest rate for some common banks are mentioned below for your easy reference:
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Savings Account Interest Rates Comparison, April 2019, Best Rates |
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Savings Bank Account |
Interest Rate Offered |
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SBI Basic Savings Bank Account |
3.50% – 4.00% |
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Bank of Baroda |
3.50% – 4.00% |
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PNB Saving Account |
3.50% – 4.00% |
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Indian Bank Savings Account |
3.50% – 4.00% |
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Canara Bank |
3.50% – 4.00% |
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RBL Bank |
6.05% p.a = Daily balance above Rs.10 lakhs 6.0% p.a = Daily balance above Rs.1 lakh 5.50% p.a = Daily balance upto Rs.1 lakh |
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Yes Bank |
5% p.a = Saving Deposits Balance upto Rs. 1 lakh 6% p.a = Saving Deposits Between Rs. 1 lakh and Rs. 1 crore 6.25% p.a = Saving Deposits above Rs. 1 crore |
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Kotak Mahindra Bank |
5% p.a = Saving Deposits Balance upto Rs. 1 lakh 6% p.a = Saving Deposits Between Rs. 1 lakh and Rs.1 crore 5.5% p.a = Saving Deposits between Rs.1 crore and Rs.5 crore |
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Lakshmi Vilas Bank |
5.25% p.a = Daily Balance Upto Rs.5 lakh 6% p.a = Above Rs.5 lakh |
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IndusInd Bank |
4% p.a = Daily balance upto Rs.10 lakh 5% p.a = Daily balance above Rs.10 lakh up to Rs.1 Crore 5.50% p.a = Daily balance above Rs.1 crore up to Rs.10 crore 6% p.a. = Daily balance above Rs.10 crore |
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Bandhan Bank |
4% p.a = Daily balance upto Rs.1 lakh. 6% p.a = Daily balance above Rs.1 lakh up to Rs.10 crore. 6.55% p.a. = Daily balance above Rs.10 crore |
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HDFC Bank |
4% p.a = Savings Account balance below Rs. 50 lakhs 4% p.a = Saving Account balance of and above Rs. 50 lakhs |
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Axis Bank |
3.50% p.a = Savings Account balance below Rs. 50 lakhs 4.00% p.a = Saving Account balance of and above Rs. 50 lakhs |
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How Much Money Should You Have in a Savings Account?
As a general rule, financial advisers recommend you have enough savings to cover at least three to six months’ worth of bills. This gives you a financial cushion in case you lose your job, face a medical issue, or encounter another money-draining emergency. Because of the liquidity of a savings account, you can access the money quickly and easily when you need it.
How to Open a Savings Bank Account?
How to Open a Savings Bank Account Offline?
While most bank related work happens online these days, some trips to the bank are absolutely unavoidable. In case you’re stuck without a portal through which to create a bank account online, you can follow these steps to open a savings bank account offline:
Step 1: Research different banks and their interest rates, find the one that best matches your specific requirements, if any, and the type of bank account you wish to open.
Step 2: Take a copy of your identity proof, two photographs, address proof, income / employment proof (if necessary), and age proof and head to the nearest branch of the bank in which you wish to create an account.
Step 3: Once at the bank, tell the clerk you wish to open a savings bank account, and he or she will hand you an account opening form.
Step 4: Fill out the form as required, and submit the same along with the copies of your identity proof, photographs, address proof, income / employment proof (if required), and age proof to the clerk.
Step 5: The clerk will then submit the application for processing and, depending on which bank you’ve chosen, your account will be opened and functional in any time between 1 and 12 working days.
How to Open a Savings Bank Account Online?
The simplest way to conduct banking operations is online, and opening a savings bank account is a very simple procedure:
Step 1: Research different banks and their interest rates, find the one that best matches your specific requirements, if any, and the type of bank account you wish to open.
Step 2: Log on to the website of the bank in which you wish to open your account. Note that not all banks have online account creation facilities.
Step 3: Fill out the online application form for the savings account that meets your needs and submit it along with a digital copy of identity proof, photographs, address proof, income / employment proof (if required), and age proof. Some banks may require you to submit physical copies of your documents for which they will send over an executive.
Step 4: Your details will be verified by the bank’s back-end team, and you will be able to start using your account almost instantly.
Documents Required to Open a Savings Bank Account
When customers decide to open a savings account, the bank requires the customer to submit certain documents. They are as follows:
- Proof of age and identity:Any authentic, registered, and recognized document issued by a competent authority, that contains the full name and a recent photograph of the applicant can be used.PAN, Voter ID, Passport, and Driving license are some examples of the documents that are accepted by banks when applying for a savings account.
- Photographs: Most banks require that customers submit at least 2 passport-sized photographs along with their application.
- Proof of address: Any authentic, registered, and recognized issued by a competent authority, which contains the address of the applicant can be used. Customers should keep either a Driving license, Voter’s ID, Passport, Utility bill are among some of the documents that can be submitted to the bank.
- Senior Citizen Card: Almost all banks offer Senior Citizen savings accounts to their customers. Applicants who wish to open a senior citizen’s account are required to submit proof of their age. A senior citizen card is issued by the Social Welfare Department and is the document that is most preferred as proof.
Depending on the applicant and the type of account being opened, the bank could ask for a few more proofs of identification, age, address, and employment.
