Impact of COVID-19 on Savings Account Interest Rates

The COVID-19 pandemic has been one of the biggest catastrophes of the 21st century. In India, the government imposed stringent lockdowns to curb the virus spread, forcing people to remain indoors and bringing the economy to a standstill. 

The pandemic has significantly impacted our lives in different ways. We all faced some kind of hardship, didn't we? You or your family members may have lost jobs, your businesses had to shut, you had to deal with lower interest income from your Savings Account. Check out this post to know more about how the pandemic has affected the interest rates. 

The RBI announced a slew of measures to help individuals and businesses cope with this challenging situation and mitigate financial hardships. But the changes have also impacted the monthly interest on Savings Account. 

The rate cuts announced by the RBI directly impacted the interest rates offered by banks on deposit accounts like Savings Accounts. 

Most banks slashed the interest rate on savings accounts and Fixed Deposits (FDs), reducing the interest income that account holders generate on their savings and deposits. 

Here are some of the changes announced by the RBI during the COVID-19 crisis-

• Repo rate slashed by 75 bps to 4.4%
• Reverse repo rate reduced by 90 bps to 4%
• Cash Reserve Ratio (CRR) reduced by 100 bps to 3%

The demonetisation was the starting point of a long falling rate cycle that continued until 2021. The interest rate on Savings Accounts has fallen consistently in the last few years. The repo rate impact further reduced the interest rate offered by banks. It is common for banks to reduce the interest rate when the RBI announces repo and reverse repo rate cuts. 

Yes, most banks generally offer higher interest rates on bigger deposits.

One of the most common reasons people change their savings accounts is to get higher interest rates on their account balance. Savings Account interest rate calculation considers the account balance and interest rate offered by the bank.

If another bank offers a higher interest rate than the current bank, people tend to switch to the other bank to generate more interest income.

Unlike Bank FDs, where the interest rate remains the same throughout the investment tenure, the Savings Account rates are not fixed. The most significant risk of switching Savings Accounts is the fall in interest rate after the account is opened. 

If you are looking to switch, you can easily open a Savings account with AU Small Finance Bank. We offer various types of accounts to suit the needs of our customers. It is easier to open a Savings account from anywhere - through our new Video Banking facility. 

At AU Small Finance Bank, we offer highly competitive interest rate, monthly income payouts, 24*7 access to banking through AU 0101 App/NetBanking, and much more!

With features like seamless Online Banking, doorstep banking convenience, feature-rich Debit Card, and more, we help our customers make the most of their banking experience.