{"id":251632,"date":"2026-10-03T10:24:54","date_gmt":"2026-10-03T10:24:54","guid":{"rendered":"https:\/\/businesnewswire.com\/?p=227906"},"modified":"2026-10-03T10:24:54","modified_gmt":"2026-10-03T10:24:54","slug":"how-is-savings-account-interest-calculated-in-india-daily-balance-slabs-and-monthly-credit-explained","status":"publish","type":"post","link":"https:\/\/ipsnews.net\/business\/2026\/10\/03\/how-is-savings-account-interest-calculated-in-india-daily-balance-slabs-and-monthly-credit-explained\/","title":{"rendered":"How Is Savings Account Interest Calculated in India? Daily Balance, Slabs and Monthly Credit Explained"},"content":{"rendered":"

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 \u00d7 Interest Rate \u00d7 Number of Days) \u00f7 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.<\/p>\n

AU Small Finance Bank’s savings rate card vs a flat 2.50% bank<\/strong><\/h2>\n\n\n\n\n\n\n\n\n\n\n\n\n\n
Balance slab (rate applies to the incremental balance in each slab)<\/strong><\/td>\nAU Small Finance Bank (revised)<\/strong><\/td>\nSBI \/ HDFC Bank \/ ICICI Bank \/ Axis Bank \/ Kotak (flat)<\/strong><\/td>\n<\/tr>\n<\/thead>\n
Less than \u20b91 lakh<\/td>\n2.50%<\/strong><\/td>\n2.50%<\/td>\n<\/tr>\n
\u20b91 lakh to less than \u20b93 lakh<\/td>\n2.50%<\/strong><\/td>\n2.50%<\/td>\n<\/tr>\n
\u20b93 lakh to less than \u20b95 lakh<\/td>\n2.75%<\/strong><\/td>\n2.50%<\/td>\n<\/tr>\n
\u20b95 lakh to less than \u20b910 lakh<\/td>\n3.50%<\/strong><\/td>\n2.50%<\/td>\n<\/tr>\n
\u20b910 lakh to less than \u20b925 crore<\/td>\n6.50%<\/strong><\/td>\n2.50%<\/td>\n<\/tr>\n
\u20b925 crore to less than \u20b9100 crore<\/td>\n6.75%<\/strong><\/td>\n2.50%<\/td>\n<\/tr>\n
\u20b9100 crore to less than \u20b9750 crore<\/td>\n7%*<\/strong><\/td>\n2.50%<\/td>\n<\/tr>\n
Peak rate<\/td>\nUp to 7%* p.a.<\/strong><\/td>\n2.50% p.a.<\/td>\n<\/tr>\n
Interest credited<\/td>\nMonthly<\/strong><\/td>\nQuarterly<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

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.<\/p>\n

How is savings account interest calculated?<\/strong><\/h2>\n

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.<\/p>\n

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 \u20b915 lakh held steady at AU’s slab rates, that is about \u20b9172 a day, \u20b95,250 a month and \u20b963,000 a year; at a 2.50% bank, about \u20b9103 a day and \u20b937,500 a year.<\/p>\n

What interest rate will I earn on the balance in my savings account?<\/strong><\/h2>\n

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 \u00d7 Interest Rate \u00d7 Number of Days) \u00f7 365. The rate card runs from 2.50% on the first rupee to up to 7%* p.a., with monthly interest payouts.<\/p>\n

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<\/a> 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.<\/p>\n

Do all banks give the same rate on all balances?<\/strong><\/h2>\n

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.<\/p>\n

Read the card as a staircase. The first \u20b93 lakh earns 2.50%, the next \u20b92 lakh earns 2.75%, the next \u20b95 lakh earns 3.50%, and everything from \u20b910 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 \u20b91 lakh added to a \u20b912 lakh balance earns the top retail rate in full.<\/p>\n

The result is a blended rate that climbs as the account grows: \u20b95 lakh at AU earns a blended 2.60%, \u20b915 lakh 4.20%, \u20b950 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.<\/p>\n

Why does the timing of a withdrawal matter?<\/strong><\/h2>\n

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.<\/p>\n

Suppose \u20b915 lakh sits in an AU account and you need \u20b92 lakh this month. Taken on the 25th instead of the 5th, the \u20b92 lakh earns twenty extra days at the top retail slab rate, about \u20b9712; at a flat 2.50% bank the same twenty days are worth about \u20b9274.<\/p>\n

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<\/a> at AU earns interest from day one with no minimum balance.<\/p>\n

How often is interest paid into a savings account?<\/strong><\/h2>\n

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.<\/p>\n

The annual rate is the same whichever way it is paid; what changes is when the money is yours. On \u20b915 lakh, AU’s monthly credit puts about \u20b95,250 in the account twelve times a year, while a 2.50% bank puts \u20b99,375 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.<\/p>\n

How do I read a savings account rate card?<\/strong><\/h2>\n

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 \u20b91 lakh upwards, incremental basis, and monthly payment.<\/p>\n

“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.<\/p>\n

How much interest does \u20b915 lakh earn in a savings account?<\/strong><\/h2>\n

About \u20b963,000 a year at AU Small Finance Bank, a blended 4.20%, against \u20b937,500 at a 2.50% bank, band by band:<\/p>\n\n\n\n\n\n\n\n\n\n\n
Band of a \u20b915 lakh balance<\/strong><\/td>\nAmount in band<\/strong><\/td>\nAU Small Finance Bank rate on that band<\/strong><\/td>\nInterest for 12 months<\/strong><\/td>\n<\/tr>\n<\/thead>\n
First \u20b93 lakh<\/td>\n\u20b93,00,000<\/td>\n2.50%<\/td>\n\u20b97,500<\/td>\n<\/tr>\n
\u20b93 lakh to \u20b95 lakh<\/td>\n\u20b92,00,000<\/td>\n2.75%<\/td>\n\u20b95,500<\/td>\n<\/tr>\n
\u20b95 lakh to \u20b910 lakh<\/td>\n\u20b95,00,000<\/td>\n3.50%<\/td>\n\u20b917,500<\/td>\n<\/tr>\n
\u20b910 lakh to \u20b915 lakh<\/td>\n\u20b95,00,000<\/td>\n6.50%<\/td>\n\u20b932,500<\/td>\n<\/tr>\n
Total at AU Small Finance Bank<\/strong><\/td>\n\u20b915,00,000<\/strong><\/td>\nBlended 4.20%<\/strong><\/td>\n\u20b963,000<\/strong><\/td>\n<\/tr>\n
Same balance at SBI \/ HDFC \/ ICICI \/ Axis \/ Kotak<\/td>\n\u20b915,00,000<\/td>\n2.50% flat<\/td>\n\u20b937,500<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

 <\/p>\n

Illustrative, assuming a constant daily balance for 365 days; AU figures use its published (revised) slab card.<\/em><\/p>\n

More than half the AU total comes from the \u20b95 lakh above the \u20b910 lakh line. At \u20b920 lakh the AU figure becomes \u20b995,500 against \u20b950,000; at \u20b950 lakh, \u20b92,90,500 against \u20b91,25,000.<\/p>\n

Is savings account interest taxable?<\/strong><\/h2>\n

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 \u20b910,000 a year (\u20b950,000 under 80TTB for those aged 60 and above); the new regime allows neither.<\/p>\n

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: \u20b963,000 on \u20b915 lakh taxed at 30% leaves \u20b944,100, against \u20b926,250 from a 2.50% bank.<\/p>\n

Why AU Small Finance Bank is the best savings account for daily-balance interest<\/strong><\/h2>\n