IDBI Bank, Punjab National Bank offers upto 3.5 percent on savings accounts

Public sector banks offer much lower interest rates on savings accounts than what many new private and small finance banks do. It's important to give some serious thought on how much interest is paid by banks for leaving your funds in the savings account. You can also use the savings account for parking your emergency funds.

As per data compiled by BankBazaar, public sector bank's IDBI Bank and Punjab National Bank offer interest rates up to 3.5 per cent on savings account, followed by Bank of Baroda and Canara Bank offering interest rates up to 3.2 per cent.

These interest rates are competitive when compared with what leading private banks offer. For instance, HDFC Bank and ICICI Bank offer 3 per cent to 3.5 per cent interest and Kotak Mahindra Bank offer 3.5 per cent to 4 per cent.

However, large public sector banks give far lower interest rates to their savings account holders. For instance, State Bank of India (SBI) pays just 2.70 per cent followed by UCO Bank paying 2.50 per cent interest on savings account. Both couldn't make it to the top ten FDs.

The interest rates offered by small finance banks are to their savings account holders is higher compared to public sector banks. For instance, AU Small Finance Bank and Ujjivan Small Finance Bank offer interest rates of up to 7per cent.

The minimum balance requirement in savings accounts of public sector banks starts from Rs 250 and at the State Bank of India, it's nil. This is kept much lower compared to the requirements of leading private banks in India because public sector banks are backed by the Government of India and they are more interested in reaching out to the lower and middle class customers with their services. For Axis Bank and HDFC Bank, the minimum balance requirement is Rs 2,500 to Rs 10,000. In the case of ICICI Bank, the minimum balance requirement is Rs 1,000 to Rs 10,000.