If you are someone who prefers to keep a large part of your money safely parked in a savings account, the recent move by India’s top banks may come as an unpleasant surprise. State Bank of India (SBI), HDFC Bank, and ICICI Bank—the country’s three biggest banks—have announced fresh cuts to their savings account interest rates, leaving depositors earning even less on their hard-earned money.
Let’s break down what this means for you—and the steps you can take to protect your savings.
What’s Happening with Savings Rates?
In June 2025, following the Reserve Bank of India’s (RBI) decision to reduce the repo rate by 50 basis points to spur economic growth, major banks adjusted their deposit rates to keep pace. As a result:
| Bank | New Savings Rate | Previous Rate |
| SBI | 2.50% (flat) | 2.7% to 3.0% depending on balance |
| HDFC Bank | 2.75%(flat) | Up to 3.5% on higher balances |
| ICICI Bank | 2.75%(flat) | Up to 3.5% on higher balances |
No matter how much you have in your account—whether ₹1,000 or ₹1 crore—you will now earn the same reduced rate.
Why This is Bad News for Savers?
This reduction is not just a technical adjustment—it has real consequences for your money:
- The current inflation rate hovers around 5–6%, which means any return below this eats away at your purchasing power.
- Suppose you have ₹5 lakh in SBI’s savings account. Earlier, you might have earned nearly ₹15,000 a year in interest. Now, that figure drops to just ₹12,500—a silent but significant cut.
- Your “real returns” (returns adjusted for inflation) are now negative. In simple terms: every year, your money loses value.
Why are banks doing this? Because cheaper borrowing costs for loans mean banks need to reduce their own deposit costs to stay profitable.
What Are Your Alternatives?
Rather than letting your money quietly lose value, here are smarter ways to use your surplus funds:
- Explore Smaller or Private Banks
Many smaller or private banks (especially Small Finance Banks) are offering higher interest rates to attract depositors. Examples include:
- RBL Bank — up to 6.75% on savings
- IndusInd Bank — up to 6%
- AU Small Finance Bank — up to 7%
Caution: Always check their creditworthiness and safety before shifting large sums.
- Consider Liquid Mutual Funds or Ultra-Short Debt Funds
For those needing liquidity but wanting better returns than savings accounts:
- Liquid and ultra-short debt funds offer 6–7% annual returns.
- They are relatively safe and allow withdrawal within 24 hours.
- Short-Term Fixed Deposits (FDs)
If you can lock away funds for a few months or years:
- Banks are giving 7–7.5% on FDs for tenures of 1–2 years.
- Senior citizens get an extra 0.5% rate.
- Government Schemes
For the risk-averse:
- Senior Citizen Savings Scheme (SCSS) — over 8% interest.
- Post Office Term Deposits — secure and state-backed.
- Tax-Free Bonds — good for high-income individuals.
What to Keep in Mind
- Safety first: Higher rates often come with higher risks. Stick to well-rated banks and funds.
- Tax impact: Interest from savings accounts and FDs above ₹10,000 (₹50,000 for seniors) is taxable.
- Liquidity needs: If you need frequent access to your money, liquid funds are better than long-term FDs.
Conclusion: Time to Rethink Idle Savings
Gone are the days when savings accounts gave decent passive returns. With rates now as low as 2.5–2.75%, keeping large sums sitting idle means losing value year after year.
- Move surplus money to better options like short-term FDs or liquid funds.
- Use higher-yielding savings accounts from credible small banks if safety permits.
- Diversify—keep some for emergencies, invest the rest wisely.
A little rethinking today could protect your wealth tomorrow.
