IDFC FIRST Bank Revises Savings Account Interest Rates: What Depositors Need to Know

In a strategic shift reflecting current market liquidity and a focus on sustainable profitability, IDFC FIRST Bank has announced a revision of its Savings Account interest rates, effective January 9, 2026. Historically known for its aggressive high-rate strategy to attract retail deposits, the lender has now recalibrated its offerings by cutting rates by up to 200 basis points (bps) on specific balance slabs. While the bank remains a competitive player in the private banking sector, the peak interest rate is now capped at 6.50 per cent per annum, moving away from the previous 7 per cent headline rate.

The new structure, applicable to Domestic, NRE and NRO accounts, utilises a progressive interest rate model. Under this system, your total balance is divided into specific buckets and each portion earns interest based on the rate assigned to that bracket. For balances up to Rs 1 lakh, the rate remains at 3.00 per cent. The most significant change occurs in the mid-tier segment: deposits above Rs 1 lakh and up to Rs 10 lakh now earn 5.00 per cent, while the premium rate of 6.50 per cent is reserved for the portion of the balance falling between Rs 10 lakh and Rs 10 crore.

To understand the impact, one must look at how "progressive" calculation works in practice. If a customer holds Rs 1 crore in their account, they do not earn 6.50 per cent on the entire amount. Instead, they earn 3 per cent on the first Rs 1 lakh, 5 per cent on the next Rs 9 lakh and 6.50 per cent only on the remaining Rs 90 lakh. This tiered approach ensures that the bank manages its cost of funds effectively while still rewarding high-value retail depositors with incremental yields that outperform many of its larger private-sector competitors.

Beyond the interest percentages, IDFC FIRST Bank continues to distinguish itself through its Monthly Interest Credit policy. While the Reserve Bank of India (RBI) suggests quarterly credits, this bank credits earned interest every month based on daily end-of-day balances. This frequent crediting provides a slight compounding advantage and immediate liquidity for savers. The interest is calculated on a 365-day basis (366 in leap years) and is rounded to the nearest rupee, ensuring high transparency for the account holder.

The stock market reacted positively to this news, with IDFC FIRST Bank shares recovering 3 per cent from their intraday lows following the announcement. Analysts view the rate cut as a margin-expanding move that reduces the bank’s interest expense. International brokerages like Nomura have maintained a "Buy" rating, noting that the bank has moved from a heavy investment phase into a period of broad-based profitability. By lowering the rates on smaller-ticket deposits, the bank is aligning its funding costs with broader industry trends while maintaining strong growth visibility.

From a tax perspective, depositors should remain mindful that while there is no TDS (Tax Deducted at Source) on savings account interest, the income is still taxable under "Income from Other Sources." Individuals can claim a deduction of up to Rs 10,000 under Section 80TTA, while senior citizens benefit from a higher deduction of up to Rs 50,000 under Section 80TTB. This makes the savings account an attractive tool for parking emergency funds, even with the slightly moderated interest rates.

Ultimately, this revision signals a maturing balance sheet for IDFC FIRST Bank. While the era of flat 7 per cent returns on lower balances has ended, the bank’s combination of 6.50 per cent peak rates, zero-fee banking and a highly rated mobile app continues to offer a compelling value proposition. For depositors, the new 2026 rates emphasize the importance of maintaining higher balances to unlock the best possible returns under the progressive slab system.

Disclaimer: The article is for informational purposes only and not investment advice.