Salary account vs savings account — the same product on different terms

A salary account is a savings account. Same product, same interest rate, same deposit insurance — with one term changed. The bank waives the minimum balance requirement for as long as your employer keeps crediting salary into it. That waiver rests on a relationship between your employer and the bank, not on anything you signed, and it ends when the relationship does.

Almost every problem people have with salary accounts follows from that one fact. And the money at stake is not interest. It is the charges that switch back on when the credits stop, on an account you have probably stopped looking at.

Same product, one conditional term

	Salary account	Regular savings account
Product type	Savings bank account	Savings bank account
Minimum balance	Waived while salary credits continue	Applies from the day you open it
Who arranged the terms	Your employer, with the bank	You, with the bank
Interest	The bank’s savings rate	The same rate
Deposit insurance	₹5 lakh per depositor per bank	₹5 lakh per depositor per bank
Bundled extras	Often tied to the corporate relationship	Whatever you pay for
What ends the arrangement	Salary credits stopping	You closing it

The row that matters is the second one. The row nobody reads is the last one.

What happens when the salary credits stop

You resign, or you are laid off, or you move jobs and the new employer banks elsewhere — so a fresh account is opened for you there and the old one stops receiving anything.

The bank then waits. After a period it sets for itself, it reclassifies the account from a salary account to a regular savings account, the minimum balance requirement begins to apply, and falling short of it triggers a non-maintenance charge.

The waiting period and the charge are both bank-specific, and we publish neither, because a figure attached to the wrong bank or the wrong account variant is worse than no figure. Do two things instead. Ask your bank in writing what happens to the account if salary credits stop. Then read the schedule of charges on the bank’s own website — every bank publishes one. Five lines decide the cost: the minimum balance requirement for your exact variant, the non-maintenance charge, the debit card annual fee, cash handling charges beyond the free limit, and SMS alert charges.

Most people meet this the wrong way round: as a penalty debit on a statement they open months later, on an account they had forgotten they held.

The two-year clock, and where the RBI puts a floor under it

This part is genuinely protective, and most coverage of dormant accounts either skips it or gets it backwards.

Under the Reserve Bank’s revised instructions on inoperative accounts and unclaimed deposits, dated 1 January 2024, an account with no customer-induced transaction for over two years is classified as inoperative. Once it is, banks are not permitted to levy penal charges for non-maintenance of minimum balance in it, no charge may be levied to activate it, and savings interest must still be credited whether or not the account is in operation. The bank must also warn you first, by letter, email or SMS, that the account will become inoperative if nothing happens on it within the next year.

Two details decide whether that protection reaches you.

Interest credited by the bank and charges debited by the bank are bank-induced, not customer-induced, so they do not reset the clock. An account nobody touches does drift to inoperative on schedule, which is the outcome you want.

But the protection only begins at that point, and reclassification to a regular savings account happens well before it. The dangerous stretch is the one in between: the account is live, the minimum balance applies, and charges accrue against a shrinking balance. That window can run for the better part of two years — and the warning is only as good as the contact details on file. If the account was opened by an employer and carries a work email you no longer have, the notice lands somewhere you will never read it.

The benefits that lapse with it

Corporate salary accounts frequently bundle what the retail version of the same account does not: a debit card with the annual fee waived, other charges waived, preferential handling, and in some arrangements an insurance cover tied to the salary relationship. We name no specific benefit and no sum assured — these vary by employer, by bank and by the corporate tier your employer negotiated, and none of it could be verified against a document that would still be true next quarter.

One item in the category matters more than the rest. An insurance cover attached to a salary account can end when the salary relationship does. People carry on believing they hold cover they no longer hold, and they find out at the worst possible moment. If you were told your salary account included cover of any kind, ask the bank in writing whether it survives your leaving, and treat a verbal assurance as worthless. If it does not, price a standalone policy before you resign.

Job hopping leaves a trail of accounts

Change jobs four times and you can be carrying four savings accounts, three of which you never chose. Each sits there, reclassified, consuming its balance in charges until the two-year rule freezes the damage.

The credit-report angle is worth stating precisely, because it is widely overstated. A savings account is not a credit facility and does not appear on your credit report. TransUnion CIBIL’s own explanation lists what the accounts section contains — loans, credit cards, overdrafts — and savings and fixed deposits are not in it. A dormant deposit account with a low balance is not, by itself, a credit-score event.

The risk is in what was attached alongside. Salary accounts commonly come with a salary overdraft facility, and often with a credit card issued on the strength of the salary relationship. Both are credit facilities and both report. An overdraft you drew on and forgot, on an account whose statements you stopped opening, is a live credit line going bad on your file — a different order of problem from a fee you can argue about. If you are unsure what is attached to an old account, pull your report and look; our guide to improving a CIBIL score covers how to read the accounts section.

A drawn-down overdraft left unpaid is a debt to that bank, which it can pursue and which can block you from opening anything new there. Unpaid fees on a dormant deposit account are a smaller and far more arguable thing — but they still eat the balance while you are not looking.

A checklist for changing jobs

Work through this before the last salary lands. Every item is easier while the account is still in good standing.

1. Decide which account you are keeping. You do not need one per employer. Pick the one whose terms you can meet unsubsidised.
2. Move standing instructions, mandates and auto-debits first. SIPs, insurance premiums, loan EMIs, NACH mandates, UPI autopay. A failed EMI mandate is a credit-report entry; a failed premium can lapse a policy.
3. Redirect anything that pays in. Dividends, interest payouts, refunds, and the account registered for your tax refund.
4. Update KYC, contact details and nominee. Replace the work email, and the mobile number if it was work-issued.
5. Ask what the account becomes, and what it will cost, once credits stop. Get the answer in writing.
6. Confirm whether any insurance cover was attached, and whether it ends.
7. Convert or close deliberately. Ask whether the bank will move you to a zero-balance or basic account instead of a full-fee one. Many will — but only if asked.
8. If closing, get written confirmation. A closure request submitted is not a closure completed. Keep the acknowledgement and check nothing debits the account afterwards.

When keeping the old account is worth it

Sometimes it is, and two reasons hold up.

The banking relationship has value at that bank. A long-running account with a visible salary history is what pre-approved offers are generated from, and it can smooth a loan application there. That is real, though worth less than people assume, and worth nothing at any other bank.

Any credit facility attached to it has age. This is where the credit-history argument actually applies. The deposit account contributes nothing to your report, but a credit card opened through that salary relationship does, and the age of your oldest card feeds your score. Closing a long-held card to tidy up can cost more than the fee you were avoiding — see how a first credit card works for why the oldest card is usually the one to keep open.

Set that against the cost of keeping it: the monthly charge times twelve, plus the balance you must strand to avoid it.

What to do with a lapsed salary account

Three honest options, in the order most people should consider them.

Convert it, or open a Basic Savings Bank Deposit Account. The BSBDA is the RBI-prescribed basic account, and it is the answer nobody advertises because it earns the bank very little and pays this site nothing at all. Under the RBI’s directions it carries no minimum balance requirement, and the minimum a bank must provide free of charge includes four withdrawals a month counting ATM withdrawals, plus an ATM or ATM-cum-debit card. That four is the floor the bank owes you, not a ceiling the RBI imposes — banks may offer more, and may price anything beyond the free minimum, a cheque book included. Ask what your bank’s version actually gives you. The trade-off is the part nobody mentions: a BSBDA holder is not eligible to hold any other savings bank account at that same bank, and an existing one must be closed within 30 days.

Open a digital zero-balance savings account. These drop the minimum balance without the BSBDA’s bar on holding another savings account at the same bank, at the cost of a fee schedule you have to read properly — debit card annual fees and cash-handling charges are where these products earn it back. Our comparison of zero-balance savings accounts works through which charges to check.

Close it. If another account already works and you are keeping this one out of inertia, closing it is a legitimate answer and costs nothing.

One caution either way. Deposit insurance covers ₹5 lakh per depositor per bank, including accrued interest — not per account. If you consolidate into one bank, that is the number that matters, and banks advertising the most attractive terms on small accounts are often small finance banks, where the limit deserves more attention rather than less.

Where this leaves you

The account type has no bearing on the tax. Interest is interest, taxed as income from other sources at your slab rate either way. The deduction people reach for — the one long known as section 80TTA, worth up to ₹10,000 of savings interest a year — survives only under the old regime. Under the new regime, now the default, it does not exist, so for most taxpayers it is worth nothing. The mechanics are in savings account interest rates, and what slab tax does to interest income is worked through in tax on FD interest.

Then run the arithmetic once. The Post Office savings account pays 4.0% for the quarter beginning 1 July 2026, a fair marker for what a savings balance realistically earns. A ₹25,000 buffer at that rate produces about ₹1,000 over a year, before tax. Now find the monthly non-maintenance charge in your own bank’s schedule of charges and multiply it by twelve.

For a lot of people the second number is bigger than the first. That is the whole argument: on a savings account you are not optimising a return, you are stopping a leak. Chasing a quarter of a percent more interest is not worth an afternoon. A fee you pay every month on an account you no longer use is worth exactly one phone call.

So keep one account you have chosen, on terms you can meet without stranding money, and close or convert the rest with written confirmation. Move anything above your genuine buffer into a fixed deposit or a small savings scheme, where the rates are materially higher.

Common questions

Is a salary account different from a savings account?

Not as a product. A salary account is a savings bank account. It earns the same interest the bank pays on savings balances, carries the same deposit insurance of ₹5 lakh per depositor per bank, and works the same way day to day. What differs is one commercial term: the bank waives the minimum balance requirement for as long as your employer credits salary into it, under an arrangement between the bank and the employer. The waiver is conditional on that relationship, not on anything you have signed.

What happens to my salary account after I resign?

Once salary credits stop, banks typically reclassify the account to a regular savings account after a period they set themselves, and the minimum balance requirement then applies. Non-maintenance charges can begin from that point. The exact waiting period and the charge are bank-specific, so ask your bank and read its schedule of charges — every bank must publish one. Do this before you resign rather than after, because the first sign for most people is a penalty debit months later.

Can a dormant bank account go into negative balance?

Not once it is formally inoperative, because at that point the penal charges stop. Before then, non-maintenance charges are debited against a shrinking balance, and how far your own bank will take that is a matter for its schedule of charges rather than a general rule — read it rather than assume. Where the floor is certain is the Reserve Bank's revised instructions of 1 January 2024: an account with no customer-induced transaction for over two years is classified as inoperative, banks are not permitted to levy penal charges for non-maintenance of minimum balance in an inoperative account, no charge may be levied to activate one, and savings interest must still be credited.

Does an unused savings account hurt my credit score?

A deposit account by itself does not appear on your credit report. TransUnion CIBIL states that the accounts section of a credit report lists credit facilities — loans, credit cards, overdrafts — not savings or fixed deposits. The risk sits in what was bundled with the salary account. A salary overdraft facility, or a credit card issued on the strength of the salary relationship, is a credit facility, it does report, and an unpaid balance on one after you have stopped watching the account will show.

Should I close my old salary account or keep it?

Decide it deliberately rather than by neglect. Keeping it is defensible if the balance is easy to maintain and the bank relationship is one you want on record when you next apply for a loan there. Closing it is better if maintaining it costs you a monthly charge for no service you use. What you should not do is leave it running unattended. If you close it, get written confirmation, and check that no standing instruction, mandate or auto-debit still points at it.

Sources

Rates and rules on this page were read directly from the following sources on the dates shown. Figures change — if you are about to act on one, confirm it at the source.

1. Inoperative Accounts / Unclaimed Deposits in Banks — Revised InstructionsReserve Bank of India · checked 18 August 2026
2. Financial Inclusion — Access to Banking Services — Basic Savings Bank Deposit AccountReserve Bank of India · checked 18 August 2026
3. Understand your credit score and reportTransUnion CIBIL · checked 18 August 2026
4. Deposit insurance coverageDeposit Insurance and Credit Guarantee Corporation · checked 18 August 2026
5. Small savings schemes — interest ratesNational Savings Institute, Ministry of Finance · checked 18 August 2026
6. Kotak811 General Schedule of Features and Charges, July 2026Kotak Mahindra Bank · checked 27 August 2026