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Which is better, PSU savings bank account or Private bank savings account?

Are you planning to open a new savings account? Here’s why a private bank savings account is better than a PSU bank account.

Sooraj is a 28-year freelance content writer. He has a savings bank account in a PSU Bank which was made by one of his relatives when he was 14. Now, Sooraj is facing problems with online transactions and debit card transactions and his account is yet to be credited with debited money during a failed transactions that took place 2 months ago. While his friends easily swipe their debit cards after drinks on a Friday night, he has to hunt for an ATM to withdraw cash. He is frustrated and he shared his problems to one of his friends. She suggested him to open a savings account with a private bank such as Kotak Mahindra Bank. Hearing this, he shared that he was apprehensive about opening a savings account with a private bank as public sector banks were backed by government while it was not the same for the private banks.

Let’s us understand whether Sooraj’s fears were legitimate or would he be better off by opening a savings account with a private bank.

Interest Rates:

The interest rate on savings account varies from banks to banks. It also depends on the amount of deposit parked in the savings account.  When it comes to interest rates, private banks offer higher interest rate than PSU banks. Many times, the interest rate offered by the private banks is nearly double the interest rate given by the PSU banks. Banks like Kotak Mahindra Bank give higher interest of up to 5% while PSU banks give interest rate of around 3%. This means that Sooraj would have earned nearly twice the returns if he opens a bank account with a private bank.    

Read: Top Banks that offer High Interest on Savings Accounts

Account opening process:

Sooraj understood how a higher interest rate would mean more savings but he was skeptical about the account opening process. He believes that opening a new account is a cumbersome process with filling up of forms and visiting a bank branch.

However, those times are long gone. It just takes a few minutes to open an account with a private bank as most of the private banks including Kotak have the facility of opening an account online or through their bank app. The entire process is online and paperless. From creating an account and physical verification part, where a bank representative verifies the documents and conducts the full KYC process, the entire process is seamless.

Digital banking:

In this digital age, many private banks have launched their digital banking arm to cater to the younger generations. Some of the digital banks available are Kotak 811, Digi Savings and SBI Yono. Digital banking is totally online. Customers receive an virtual debit card that they can use like a normal debit card and do transactions on online shopping sites etc. Banks like Kotak Mahindra have dedicated customer service for Kotak 811 customers. Online savings accounts are zero balance account and hence Sooraj doesn’t have to keep a minimum balance in his account or pay any penalty for non-maintenance of minimum balance. Digital banks do not have annual maintenance charges or any charges. Hence, digital accounts by private banks is a cheaper and easier alternative


Sooraj’s generation crave for discounts and offers by the bank. They like to be pampered. Private banks have more offers than public sector banks. Whether you are into experiencing food, movies or travel, you can receive offers on various online and offline merchants.

Because of these reasons, Sooraj would have been better off by opening a savings account in a private bank like Kotak Mahindra than a PSU bank.

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