IDFC First Bank Slashes Savings Rates, Depositors Face Lower Yields

BANKINGFINANCE

Overview

IDFC First Bank has revised savings account interest rates, effective January 9, 2025, cutting the highest annual rate to 6.5% from 7%. The bank also restructured deposit balance categories, altering progressive interest calculations. This move prompts depositors to reassess parking idle cash.

IDFC First Bank has again altered its savings account interest rates, a move effective January 9, 2025, that will trim yields for depositors. The bank lowered its top annual rate by 50 basis points to 6.5%, stepping back from an aggressive high-rate strategy. It has also reshuffled deposit balance categories for interest calculation.

New Rate Structure

The revised structure features progressive interest calculation, credited monthly, but with adjusted balance tiers. Rates now range from 3.0% for balances up to ₹1 lakh, 5.0% for ₹1 lakh to ₹10 lakh, and a top rate of 6.5% for amounts between ₹10 lakh and ₹10 crore. Higher balances over ₹10 crore are tiered down to 4.0%.

Impact on Savers

This differs from the prior framework where balances above ₹5 lakh earned a flat 7% up to ₹5 crore. The new tiers offer more gradual rewards for mid-sized deposits, while very large balances face a sharper decline in returns. A ₹1 crore deposit, for example, will now earn a blended rate across applicable slabs, not a flat 6.5% on the entire sum.

Strategic Shift

The 50 bps reduction for balances over ₹10 lakh impacts overall yields, though smaller depositors may see less effect as rates up to ₹10 lakh remain relatively competitive. With interest calculated on daily closing balances, account holders might consider alternatives like liquid mutual funds for surplus cash, depending on their risk tolerance and liquidity needs.

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