How to Calculate Interest on Your Savings Account

How to Calculate Interest on Your Savings Account

27 February 2024 | By INDIE

A savings account is a foundational tool in managing personal finances. Besides providing a secure space for funds and offering withdrawal flexibility, one of its most intriguing features is the interest income it generates. Understanding how to calculate interest on your savings account is not only a practical financial skill but also a means to maximise the potential returns on your money. 

The Basics of Savings Account Interest

Interest on savings account is essentially the extra money your bank pays you for keeping your funds with them. It is a reward for entrusting them with your savings. The interest you earn depends on the interest rate set by the bank and the balance you maintain in your account. Unlike other investment vehicles, the process of calculating interest on a savings account is relatively straightforward, making it an ideal starting point for those new to the world of personal finance.

Understanding Interest Rate

The interest rate is the percentage at which your deposited money grows annually. It is a crucial factor in determining how much interest you will earn over time. Different banks offer varying interest rates, so it is essential to be aware of the rate your bank provides for your savings account. Some banks may even offer different rates based on the account type or the amount deposited. Below are the savings account interest rate offered across various bank 

Bank Name
Savings Account Interest Rate
Indie by IndusInd Bank
Up to 6.75% p.a.
State Bank of India 2.70%
HDFC Bank 3.00% - 3.50%
ICICI Bank 3.00% - 3.50%
Axis Bank
3.00% - 3.50%
Kotak Mahindra Bank 3.50% - 4.00%
Yes Bank 4.00% - 7.00%
Bank of Baroda
2.75% - 3.35%
Punjab National Bank
2.70% - 2.80%
Canara Bank
2.90% - 3.55%


Frequency of Interest Calculation

To understand how to calculate interest on savings account, it is crucial to learn the frequency at which the calculations occur. As per banking norms, interest is usually calculated daily based on your closing balance. However, the actual crediting of interest to your account may happen quarterly, semi-annually or annually, depending on your bank's policies. Some banks, however, offer more frequent interest payouts, like monthly, providing you with a steady income stream.

Simple Steps to Calculate Interest on Your Savings Account

Determine Your Daily Balance

Your daily balance is the amount of money you have in your account at the end of each day.

Identify the Number of Days in the Month

Depending on the month, there can be 28, 29 (If it's a leap year), 30 or 31 days. This is crucial for accurately calculating the interest earned.

Know Your Annual Interest Rate

The interest rate is usually expressed as a percentage. This is the rate at which your money grows annually.

Apply the Formula

The formula to calculate interest is straightforward - 

Interest = (Daily balance × Number of days in a month × Annual interest rate​) / Number of days in a year


Let's say your daily balance is ₹5,000, the annual interest rate is 2%, and there are 30 days in the month. 

Interest = (5000 x 30 x 2) / 365

~ 8.22%

Tips to Optimise Savings Account Interest

Monitor Interest Rates

Keep an eye on the interest rates offered by your bank. If there is a better rate available, consider switching or negotiating with your current bank.

Maintain Consistent Balance

Aim to keep a stable balance in your savings account. This not only ensures consistent interest but may also make you eligible for additional benefits.

Explore Different Account Types

Some banks offer specialised savings accounts with higher interest rates. Explore these options to maximise your earnings.

Also Read: Unlock Financial Freedom with Savings Account

INDIE Savings Account

INDIE by IndusInd Bank offers a savings account with distinct features, keeping in mind the diverse customer's preferences and lifestyles. With INDIE, you can enhance your savings experience. Enjoy appealing interest rates of up to 6.75% p.a., the flexibility to choose your mobile number as your account number, access to banking services across multiple channels, enticing deals, and cashback offers on your debit card.  

The application process is straightforward, requiring just four simple steps, including a Video KYC, making it a hassle-free and 100% online experience. Experience banking that exceeds your expectations with INDIE by IndusInd Bank.


Calculating interest on your savings account need not be a daunting task. By grasping the fundamental principles outlined in this guide, you can confidently navigate the world of interest income. Regularly monitoring your account, understanding the factors influencing interest, and making informed decisions can go a long way in optimising your savings and ensuring that your money works harder for you. 

Remember, the journey to financial literacy begins with simple steps, and mastering the art of calculating savings account interest is an excellent starting point for anyone on the path to financial empowerment.

Disclaimer: The information provided in this article is generic and for informational purposes only. It is not a substitute for specific advice in your circumstances. Hence, you are advised to consult your financial advisor before making any financial decision. IndusInd Bank Limited (IBL) does not influence the views of the author in any way. IBL and the author shall not be responsible for any direct/indirect loss or liability incurred by the reader for making any financial decisions based on the contents and information.