APY Calculator

APY (Annual Percentage Yield) is the real rate of return earned on a savings deposit or investment, taking into account the effect of compounding interest. Unlike the nominal interest rate, APY accounts for how frequently interest compounds within a year. A savings account offering 4% nominal interest compounded daily has an APY of approximately 4.08%, because each day's interest earns additional interest.

APY (Annual Percentage Yield) measures how much you earn on a deposit after compounding. APR (Annual Percentage Rate) measures the simple annual cost of a loan without compounding. On a savings account offering 4.5% nominal interest compounded daily, the APY is 4.603%. On a loan with 12% APR compounded monthly, the effective annual rate is 12.68%. In India, RBI mandates APR disclosure on all retail loans under the Fair Lending Practices Code.

APY is calculated using the formula: APY = (1 + r/n)^n - 1, where r is the nominal annual interest rate (as a decimal) and n is the number of compounding periods per year. For daily compounding with a 4% nominal rate: APY = (1 + 0.04/365)^365 - 1 = 4.081%. For monthly compounding: APY = (1 + 0.04/12)^12 - 1 = 4.074%. More frequent compounding always produces a higher APY for the same nominal rate.

A 4.5% APY means that for every Rs 1,00,000 deposited, you earn Rs 4,500 in interest over one year after compounding. If the account compounds daily, the effective daily rate is approximately 0.01232% and the nominal rate used to produce 4.5% APY would be about 4.402%. At the end of one year, Rs 1,00,000 grows to Rs 1,04,500. Yes Bank and IDFC First Bank currently offer savings account rates near this level in India.

As of July 2026, a good APY for a savings account in India is above 4%. Most public sector banks like SBI and PNB offer only 2.70% to 3.00%. HDFC Bank and ICICI Bank offer 2.50% to 3.50%. The highest rates come from small finance banks and a few private banks: IDFC First Bank and Yes Bank offer 7.00% on balances below Rs 1 crore. AU Small Finance Bank offers up to 7.25% on higher balances. These rates far exceed the inflation rate of approximately 4% as of mid-2026.

A 5% APY means your deposit earns a real annual return of 5% after all compounding effects. On Rs 1,00,000, you earn Rs 5,000 in one year. On Rs 10,00,000, you earn Rs 50,000. Over 10 years, Rs 1,00,000 at 5% APY grows to approximately Rs 1,62,889. In India, fixed deposits from small finance banks and select private banks occasionally offer 5% and above, particularly for tenures of 1 to 3 years.

As of July 2026, IDFC First Bank and Yes Bank offer the highest savings account APY at 7.00% per annum on balances below Rs 1 crore. AU Small Finance Bank offers 7.25% on certain high-value tiers. These rates are substantially above the RBI repo rate of 5.25%, reflecting the deposit-gathering strategy of newer private banks and small finance banks. Rates can change with RBI monetary policy and should be verified on each bank's official website before depositing.

At a nominal rate of 4.5%, compounding annually gives APY of exactly 4.500%, monthly gives 4.594%, daily gives 4.603%, and continuously gives 4.603%. The difference between monthly and daily compounding is only 0.009 percentage points on a 4.5% nominal rate. For a Rs 10,00,000 deposit held 10 years, daily vs annual compounding at 4.5% nominal produces a Rs 4,680 difference in total interest. In India, savings accounts use daily balance calculation (mandated by RBI in 2010), while FDs typically use quarterly compounding.

APY is not the same as compound interest, but it expresses the result of compound interest as a standardised annual return. Compound interest is the process of earning interest on previously earned interest. APY is the metric that standardises different compounding frequencies into one comparable annual percentage, making it possible to compare a daily-compounding savings account against a quarterly-compounding FD on equal terms. APY is always equal to or greater than the nominal interest rate.

To calculate interest earned on a given day using APY: Daily Interest = Principal x (APY / 365). For a Rs 1,00,000 balance at 4% APY: Daily Interest = 1,00,000 x (0.04 / 365) = Rs 10.96 per day. Over 365 days, this totals Rs 4,000 -- exactly 4% of principal, as expected. Note that savings account interest is calculated on the daily closing balance using the nominal rate, not the APY. The APY is the annualised effective rate that results from the compounding of those daily calculations.

To find approximate monthly interest from APY: Monthly Rate = (1 + APY/100)^(1/12) - 1. For a 4.5% APY: Monthly Rate = (1.045)^(1/12) - 1 = 0.3675%. On Rs 1,00,000: Monthly Interest = 1,00,000 x 0.003675 = Rs 367.50. Over 12 months, this compounds to Rs 4,500 -- the full 4.5% APY. This is why the APY calculator shows a monthly effective rate alongside the annual rate.

Indian fixed deposits use quarterly compounding under RBI guidelines. For a 1-year FD at 7.00% nominal rate, the effective APY is: APY = (1 + 0.07/4)^4 - 1 = 7.186%. For a 5-year FD at 6.50% nominal rate: APY = (1 + 0.065/4)^4 - 1 = 6.648%. The effective APY always exceeds the stated rate for compounding more frequent than once a year. HDFC Bank currently offers 7.00% nominal (approximately 7.186% effective APY) on 1-year to 5-year FDs.

At 4% APY compounded daily, the nominal daily rate is APY/365 = 0.010959% per day. On Rs 5,00,000: Daily interest = Rs 5,00,000 x 0.00010959 = Rs 54.79 per day. Annual interest = Rs 54.79 x 365 = Rs 20,000, which is exactly 4% of Rs 5,00,000. For compounding to apply meaningfully, the interest must be credited to the account and reinvested -- which is how savings accounts (credited quarterly) and reinvested FDs work.

A 7-day APY, used mainly for money market funds and liquid funds in the US, annualises the return earned over the most recent 7 days. The formula is: 7-Day APY = ((1 + 7-day return)^(365/7)) - 1. In India, liquid funds and overnight funds report returns as annualised 1-day or 7-day yields. As of July 2026, leading liquid funds in India yield approximately 7.00% to 7.50% on a 7-day annualised basis, well above savings account rates.

Fermor is an Indian fintech platform providing free financial calculators and a financial eligibility engine. The APY calculator is part of a suite of 525+ calculators covering savings, SIP, home loans, tax, and retirement planning. Fermor is free to use at fermor.in.