IDFC First Bank has reduced interest rates on its savings accounts effective 9 January, while retaining its structure of rewarding customers with higher balances.

The private lender, which follows a progressive interest rate system under which higher balance slabs earn different rates, has reduced savings accounts by up to 200 basis points for select categories.

Under the revised structure, savings account balances earn different interest rates:

• Up to Rs 1 lakh: 3% per annum (unchanged)

• Above Rs 1 lakh to Rs 10 lakh: 5% (earlier bank offered 7% for the slab of Rs 5 lakh to Rs 5 crore)

• Above Rs 10 lakh to Rs 10 crore: 6.5% (earlier a 6.75% interest was given on savings in the band of Rs 5 crore to 10 crore)

• Above Rs 10 crore to Rs 25 crore: 6% (unchanged)

• Above Rs 25 crore to Rs 100 crore: 5% (unchanged)

• Above Rs 100 crore: 4% (unchanged)

The progressive rates mean that the higher rate applies only to the portion of the balance within that slab, and not to the entire account balance.

For example, if a customer maintains a savings account balance of Rs 10 lakh:

• The first Rs 1 lakh earns interest at 3%

• The remaining Rs 9 lakh earns interest at 5%.

Last month, the Reserve Bank of India cut the key repo rate by 25 basis points to 5.25%.