For investors taking their first steps into personal finance, opening a savings account can benefit in a variety of ways, from interest rates to security and liquidity. The first two things that come to mind when opening a savings account are deposit security and interest rates. Individuals can improve this by looking at Post Office Savings Accounts (POSB) and India Post Payments Bank (IPPB) Savings Accounts. Since both of these deposit options are regulated by the Department of Post, which is part of the Ministry of Communications, Government of India, the deposit security risk is purely zero. Following the IPPB’s announcement of a 25 basis point interest rate cut on savings account variants yesterday, let’s compare the benefits and interest rates of the IPPB and POSB for a better understanding before opening one.
IPPB savings account
IPPB offers three types of savings accounts: ordinary savings account, digital savings account and basic savings account, for a good alternative. Regular savings accounts at IPPB can be established with no initial deposit amount and no requirement for the client to maintain an average monthly balance. This account can be linked to a POSA (Post Office Savings Account), which would sweep all end-of-day balances over Rs. 2 lakh in the linked POSA (Post Office Savings Account). Customers can set up a regular savings account at any bank access point or at home, and they can make unlimited cash deposits and withdrawals.
As the name suggests, anyone over the age of 18 with an Aadhaar and PAN card can open a digital savings account with zero balance online through the IPPB mobile app. Customers will enjoy benefits such as a free RuPay virtual debit card, no monthly average balance requirement, free monthly e-statement and maximum annual cumulative deposit limit of Rs. 1,20,000 upon opening an account. Customers who open a digital savings account with IPPB must meet KYC requirements within 12 months for the account to remain operational.
Customers who open a basic savings account enjoy the same benefits as those who open a regular savings account, but they can only make four cash withdrawals per month. There is no obligation to maintain an average monthly amount, and the account can be opened without balance. This account can be linked to a POSA (Post Office Savings Account), and any amount above Rs. 2 lakh at the end of the day can be transferred into the linked POSA (Post Office Savings Account). The IPPB has deducted 25 basis points on interest rates for all of the aforementioned savings account variations. The IPPB will provide the following interest rates on savings bank deposits from 1 June 2022.
Post Office Savings Accounts (POSB)
This deposit option is part of the Post Office Department’s Postal Savings Schemes. A single adult, two adults, a guardian for a minor, a guardian for an insane person or a minor over the age of ten can all open a Postal Savings Account (CS). A minimum deposit of INR 500/- is required to open an account, which has no maximum restriction. The minimum withdrawal amount is Rs. 50. Post Office Savings Accounts now carry an annual interest rate of 4.0 percent, determined on the basis of a minimum amount between the 10th and the end of the month. According to India Post guidelines, interest should be credited to the account at the end of each financial year at the interest rate specified by the Ministry of Finance, and interest received on all savings bank accounts up to Rs. 10,000 is excluded from taxable income under Section 80TTA of the Income Tax Act.