Money Clarity

What idle money in a savings account costs you

Savings accounts at the large Indian banks pay roughly 2.7 to 3.5 percent. Inflation is usually higher, so a balance sitting there is losing value slowly and quietly. The fix is not risk - a sweep facility at the same bank pays a fixed-deposit rate on the same money with the same instant access, and most people have never been offered one.

The problem: the default account is the worst-paying product your bank sells

The savings account is where money lands and where it stays, because moving it requires a decision nobody prompts you to make. Your bank has no reason to prompt you - your idle balance is cheap funding for it.

SBI pays around 2.7 percent; HDFC, ICICI and Axis around 3 to 3.5 percent; Kotak around 3.5 percent
Higher advertised rates usually apply only above a large balance threshold or on a specific account variant
Interest is calculated daily on the closing balance but paid quarterly, so it is invisible month to month
No alert exists anywhere in banking that says your balance has been idle for six months

How much this is worth, in rupees

The gap only matters above a certain balance. Below that, this is not worth your attention and you should ignore it.

Rs 1,00,000 idle for a year at 3 percent instead of 7 percent: roughly Rs 4,000 forgone
Rs 5,00,000: roughly Rs 20,000 forgone in a year, for money you were not going to touch anyway
Below about Rs 50,000, the difference is a few hundred rupees a year and not worth the effort
This is the lowest-priority item on the money-left-on-the-table list, and it still beats doing nothing

The tax rule almost every page gets wrong

Interest on a savings account is taxable, and the exemption most articles cite no longer applies to most people.

Section 80TTA gives a deduction of up to Rs 10,000 on savings account interest - but ONLY under the old tax regime
Under the new tax regime, 80TTA is not available at all. If you are on the new regime, your savings interest is taxable from the first rupee
Section 80TTB gives senior citizens up to Rs 50,000, also old regime only, and cannot be combined with 80TTA
Neither covers fixed deposit or recurring deposit interest - those are fully taxable in both regimes
Which regime you are on therefore changes the answer, and most comparisons do not mention it

The options, from least to most effort

Start at the top. The first one takes one call to your bank and changes nothing about how you access the money.

Sweep-in / auto-sweep FD: your bank moves anything above a threshold you set into a fixed deposit and back out automatically when you spend. Same bank, same account, FD rate, no lock-in in practice
A manual short-tenure FD for money you know you will not need for three to twelve months
A liquid mutual fund: typically higher than a savings account, redeemable in about a working day, but it is a market instrument and not guaranteed
A higher-rate savings account at a small finance bank: check the DICGC insurance limit of Rs 5 lakh per depositor per bank before moving large amounts

What not to do

The mistakes here cost more than the gain being chased.

Do not move your emergency fund somewhere you cannot reach in a day - the whole point of it is access
Do not chase a rate at an institution you have not checked, and never above the Rs 5 lakh DICGC cover without deliberate reason
Do not optimise this while carrying a credit card balance at 36 to 42 percent - the arithmetic is not close
Do not lock money into a long FD to gain a few hundred rupees and then break it early at a penalty

Common questions

What is the interest rate on savings accounts in India?

Roughly 2.7 percent at SBI and about 3 to 3.5 percent at HDFC, ICICI, Axis and Kotak. Higher advertised rates generally apply only above a large balance threshold or on a specific account variant. Small finance banks pay more, subject to the Rs 5 lakh DICGC deposit insurance limit.

Is savings account interest tax free in India?

Only under the old tax regime, where Section 80TTA allows a deduction of up to Rs 10,000 (Rs 50,000 for senior citizens under 80TTB). Under the new tax regime neither is available, so savings interest is taxable from the first rupee. Fixed and recurring deposit interest is fully taxable under both regimes.

Is a sweep FD better than a savings account?

For money you are not going to spend this month, generally yes. A sweep facility automatically moves your balance above a threshold into a fixed deposit at the same bank and pulls it back when you spend, so you get the FD rate with effectively the same access. It is a setting on your existing account, not a new product.

If you have more than about Rs 1 lakh sitting still, ask your bank to switch on auto-sweep. It takes one call, the money stays as accessible as it is now, and it is the least effortful item on this entire site.

Written by Danish Mirza, founder of Unyfy. 14 years in Indian lending and collections at Standard Chartered, Barclays, Ola Money and Uni Cards.
Last reviewed 2026-09-09.