Savings Account Update: Interest Rates Reworked From January 9, 2026 – What Depositors Need to Know

Account holders who rely on savings accounts for parking their money should take note of an important development. From January 9, 2026, IDFC First Bank has rolled out a revised savings account interest rate framework. The update reshapes how interest is earned across different balance levels and continues the bank’s focus on a progressive interest rate system.

While customers with sizeable balances may find the new structure rewarding, those maintaining lower balances could see relatively modest returns. Understanding how these revised rates work is key to knowing where you stand.

What’s New in the Savings Account Interest Structure?

Under the updated system, savings account interest is no longer viewed as a single flat rate. Instead, the bank applies different interest rates to different portions of your balance, depending on which slab the money falls into. This method is known as a progressive interest rate structure.

One thing that remains unchanged is the monthly credit of interest, ensuring customers continue to benefit from regular compounding.

Revised Savings Account Interest Rates (Progressive Basis)

As per the updated framework effective January 9, 2026, the applicable slabs are:

• Up to ₹5 lakh – 3% per annum
• ₹5 lakh to ₹5 crore – up to 7% per annum
• ₹5 crore to ₹10 crore – up to 6.75% per annum
• ₹10 crore to ₹25 crore – 6% per annum
• ₹25 crore to ₹100 crore – 5% per annum
• Above ₹100 crore – 4% per annum

Earlier Savings Account Interest Rates

Before the January 2026 revision, the savings account interest structure was as follows:

• Up to ₹1 lakh – 3%
• ₹1 lakh to ₹10 lakh – 5%
• ₹10 lakh to ₹10 crore – up to 6.5%
• ₹10 crore to ₹25 crore – 6%
• ₹25 crore to ₹100 crore – 5%
• Above ₹100 crore – 4%

How the Progressive Interest System Works

With a progressive model, higher rates apply only to incremental balances, not the entire deposit.

For example:

If your savings account balance is ₹10 lakh, interest is calculated as:

• 3% on the first ₹1 lakh
• 5% on the remaining ₹9 lakh
• If your balance is ₹1 crore, interest is calculated as:
• 3% on the first ₹1 lakh
• 5% on the next ₹9 lakh
• Up to 6.5% (or applicable higher slab rate) on the remaining amount

Key Differences Between Old and New Rates

1. Effect on Lower Balance Accounts

Previously, balances between ₹1 lakh and ₹10 lakh earned 5% interest. Under the new structure, balances up to ₹5 lakh earn 3%.

As a result, customers maintaining balances between ₹1 lakh and ₹5 lakh may see lower interest earnings compared to earlier.

2. Strong Advantage for Mid-Sized Deposits

The most noticeable improvement is for customers holding moderate to high balances.

Earlier, interest of 5% applied up to ₹10 lakh. Now, balances from ₹5 lakh up to ₹5 crore can earn significantly higher interest—up to 7%, making this range highly attractive for salaried professionals and long-term savers.

3. Marginal Gain for ₹5–10 Crore Balances

Balances between ₹5 crore and ₹10 crore now earn up to 6.75% interest, compared to the earlier effective rate of around 6.5%. While the increase is small, it still adds incremental value.

4. No Change for Very High Balances

Interest rates for very large deposits remain unchanged:

• ₹10–25 crore – 6%
• ₹25–100 crore – 5%
• Above ₹100 crore – 4%

Interest Calculation and Credit Method

• In line with RBI norms, savings account interest is calculated on a daily end-of-day balance and credited monthly.
• IDFC First Bank calculates interest using:
• 365 days in a non-leap year
• 366 days in a leap year

What Should Account Holders Take Away From This?

The revised savings account rates signal a clear strategy: encouraging customers to maintain higher average balances by offering competitive returns on mid-sized deposits. For those using savings accounts primarily for liquidity, the account still serves its purpose well.

However, for surplus funds that are not required immediately, customers may consider alternatives such as liquid mutual funds, which often offer better returns while still allowing quick access to money and focusing on capital preservation.