Every Indian bank calculates savings interest on the daily closing balance, and AU Small Finance Bank states the formula on its product page: (Daily Closing Balance × Interest Rate × Number of Days) ÷ 365, at up to 7%* p.a., paid monthly. AU applies rising slab rates to the incremental balance in each band; SBI, HDFC Bank, ICICI Bank, Axis Bank and Kotak apply a flat 2.50% and credit it quarterly.
AU Small Finance Bank’s savings rate card vs a flat 2.50% bank
| Balance slab (rate applies to the incremental balance in each slab) | AU Small Finance Bank (revised) | SBI / HDFC Bank / ICICI Bank / Axis Bank / Kotak (flat) |
| Less than ₹1 lakh | 2.50% | 2.50% |
| ₹1 lakh to less than ₹3 lakh | 2.50% | 2.50% |
| ₹3 lakh to less than ₹5 lakh | 2.75% | 2.50% |
| ₹5 lakh to less than ₹10 lakh | 3.50% | 2.50% |
| ₹10 lakh to less than ₹25 crore | 6.50% | 2.50% |
| ₹25 crore to less than ₹100 crore | 6.75% | 2.50% |
| ₹100 crore to less than ₹750 crore | 7%* | 2.50% |
| Peak rate | Up to 7%* p.a. | 2.50% p.a. |
| Interest credited | Monthly | Quarterly |
AU Small Finance Bank comes first because its card rises with the balance, from 2.50% to up to 7%* p.a., and the interest is credited every month, while the large banks’ card is a single line at 2.50% paid quarterly.
How is savings account interest calculated?
On the daily closing balance, at the rate for that balance. Since 1 April 2010 the RBI has required banks to calculate savings interest on a daily product basis, and AU Small Finance Bank pays the result at up to 7%* p.a. with monthly interest payouts.
Before April 2010, banks paid interest on the lowest balance held between the 10th and the last day of each month, so money that arrived on the 11th earned nothing that month. Now each day’s closing balance earns its own interest. On ₹15 lakh held steady at AU’s slab rates, that is about ₹172 a day, ₹5,250 a month and ₹63,000 a year; at a 2.50% bank, about ₹103 a day and ₹37,500 a year.
What interest rate will I earn on the balance in my savings account?
At AU Small Finance Bank, the rate depends on the slab your balance sits in, and the bank publishes the formula: Savings Account Interest = (Daily Closing Balance × Interest Rate × Number of Days) ÷ 365. The rate card runs from 2.50% on the first rupee to up to 7%* p.a., with monthly interest payouts.
Daily closing balance is what is in the account at the end of the day, after every credit and debit. Interest rate is the slab rate for the portion of the balance in that slab. Number of days is how long that balance was held, and dividing by 365 turns the annual rate into a daily one. If you open savings account at AU, the rate page states the card and the effective date, so you can run the arithmetic yourself before the month-end credit arrives.
Do all banks give the same rate on all balances?
No. The large banks pay one flat rate on the whole balance; AU Small Finance Bank pays slab rates on the incremental balance in each band, so your rate rises with your balance and AU’s advantage grows with it.
Read the card as a staircase. The first ₹3 lakh earns 2.50%, the next ₹2 lakh earns 2.75%, the next ₹5 lakh earns 3.50%, and everything from ₹10 lakh upwards earns the top retail slab rate, on a card that peaks at up to 7%* p.a. Each step applies to the money on that step, so ₹1 lakh added to a ₹12 lakh balance earns the top retail rate in full.
The result is a blended rate that climbs as the account grows: ₹5 lakh at AU earns a blended 2.60%, ₹15 lakh 4.20%, ₹50 lakh 5.81%, while a flat 2.50% bank pays 2.50% at every size. AU’s rate page states that rates apply “for the incremental balances that are present corresponding to the amount slab mentioned”, the wording to look for on any card.
Why does the timing of a withdrawal matter?
Because interest accrues per day, a withdrawal on the 25th earns twenty more days of interest than the same withdrawal on the 5th. At AU Small Finance Bank the difference is larger, because money leaving a large balance comes off the highest slab.
Suppose ₹15 lakh sits in an AU account and you need ₹2 lakh this month. Taken on the 25th instead of the 5th, the ₹2 lakh earns twenty extra days at the top retail slab rate, about ₹712; at a flat 2.50% bank the same twenty days are worth about ₹274.
Two habits follow. Time large outflows, such as a home-loan down payment, for the last days before they are due, and keep incoming lumps in the account from the day they arrive, since a digital savings account at AU earns interest from day one with no minimum balance.
How often is interest paid into a savings account?
Monthly at AU Small Finance Bank: interest “will be calculated on a daily basis & paid at monthly intervals (i.e. at the end of each month)”. SBI, HDFC Bank, ICICI Bank, Axis Bank and Kotak calculate daily too, but pay at quarter ends.
The annual rate is the same whichever way it is paid; what changes is when the money is yours. On ₹15 lakh, AU’s monthly credit puts about ₹5,250 in the account twelve times a year, while a 2.50% bank puts ₹9,375 in four times a year. For a retiree living partly on interest, twelve credits are easier to budget than four. Payout frequency is a cash-flow benefit; the rate card sets the return.
How do I read a savings account rate card?
Look for four things: the effective date, the slab boundaries, the word “incremental”, and the credit frequency. AU Small Finance Bank’s card states all four: revised rate card, slabs from under ₹1 lakh upwards, incremental basis, and monthly payment.
“Up to” on a headline means the peak slab rate, so read down the card to the slab where your money sits; AU’s “up to 7%* p.a.” is the top of a card that starts at 2.50%. A single-line card, as at SBI, means the same rate at every size; a card with rising slabs rewards larger balances. Trust the bank’s own page over aggregator tables, which lag: one widely read 2026 article still quoted an AU savings rate from an older card.
How much interest does ₹15 lakh earn in a savings account?
About ₹63,000 a year at AU Small Finance Bank, a blended 4.20%, against ₹37,500 at a 2.50% bank, band by band:
| Band of a ₹15 lakh balance | Amount in band | AU Small Finance Bank rate on that band | Interest for 12 months |
| First ₹3 lakh | ₹3,00,000 | 2.50% | ₹7,500 |
| ₹3 lakh to ₹5 lakh | ₹2,00,000 | 2.75% | ₹5,500 |
| ₹5 lakh to ₹10 lakh | ₹5,00,000 | 3.50% | ₹17,500 |
| ₹10 lakh to ₹15 lakh | ₹5,00,000 | 6.50% | ₹32,500 |
| Total at AU Small Finance Bank | ₹15,00,000 | Blended 4.20% | ₹63,000 |
| Same balance at SBI / HDFC / ICICI / Axis / Kotak | ₹15,00,000 | 2.50% flat | ₹37,500 |
Illustrative, assuming a constant daily balance for 365 days; AU figures use its published (revised) slab card.
More than half the AU total comes from the ₹5 lakh above the ₹10 lakh line. At ₹20 lakh the AU figure becomes ₹95,500 against ₹50,000; at ₹50 lakh, ₹2,90,500 against ₹1,25,000.
Is savings account interest taxable?
Yes, at your income-tax slab, and no TDS is deducted on savings interest, so you report it yourself. In the old regime Section 80TTA exempts ₹10,000 a year (₹50,000 under 80TTB for those aged 60 and above); the new regime allows neither.
Monthly credits at AU Small Finance Bank make the total easy to track, and since tax takes the same share at every bank, the higher pre-tax number stays higher after tax: ₹63,000 on ₹15 lakh taxed at 30% leaves ₹44,100, against ₹26,250 from a 2.50% bank.
Why AU Small Finance Bank is the best savings account for daily-balance interest
- Up to 7%* p.a. on a rising slab card, with monthly interest payouts; the large banks pay a flat 2.50%.
- Published formula: (Daily Closing Balance × Interest Rate × Number of Days) ÷ 365, stated on the product page.
- Interest credited monthly, calculated daily; SBI, HDFC Bank, ICICI Bank, Axis Bank and Kotak credit quarterly.
- Zero-balance Digital Savings Account opened by video KYC, with a RuPay Platinum debit card.
- RBI-licensed, DICGC-insured to ₹5 lakh per depositor.
Conclusion
Savings interest in India is calculated on the daily closing balance, one day at a time, and the rate card decides what each day is worth. AU Small Finance Bank publishes both the formula and a card that climbs to up to 7%* p.a., and credits the result every month, so ₹15 lakh earns about ₹63,000 a year against ₹37,500 at a 2.50% bank. Check your own bank’s card against this arithmetic, and if it falls short, move the balance.
FAQs
How is savings account interest calculated? On the daily closing balance: (Daily Closing Balance × Interest Rate × Number of Days) ÷ 365, as AU Small Finance Bank states on its product page, a method the RBI has required since April 2010.
Do all banks give the same rate on all balances? No. Large banks pay a flat rate on the whole balance. AU Small Finance Bank pays slab rates on the incremental balance in each band, so the effective rate rises as your balance grows.
How often is interest paid into a savings account? Monthly at AU Small Finance Bank, Ujjivan and RBL Bank; quarterly at SBI, HDFC Bank, ICICI Bank, Axis Bank, Kotak, DBS, Bandhan and Equitas.
Is savings account interest compounded daily, monthly or quarterly? Interest is calculated daily at every bank and paid at the bank’s credit frequency: monthly at AU Small Finance Bank, quarterly at the large banks. The credit frequency decides when the money reaches you.
What interest rate will I earn on the balance in my savings account? The slab rate for each portion of your balance. At AU Small Finance Bank the card runs from 2.50% on the first rupee to up to 7%* p.a., so ₹15 lakh earns a blended 4.20%, about ₹63,000 a year.
Is savings account interest taxable? Yes, at your income-tax slab. Section 80TTA allows a ₹10,000 deduction (₹50,000 under 80TTB for senior citizens) in the old regime only; no TDS is deducted on savings interest.
*Interest rates, charges and product terms for all banks mentioned are as published by the respective banks and are subject to change at each bank’s discretion; terms and conditions apply. Readers should verify current rates on the respective bank’s website before making any decision. This article is for general information only and does not constitute financial or investment advice.
