What is the difference between APY and APR?

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.

How is APY calculated?

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.

What does 4.5% APY mean on a savings account?

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.

What is a good APY for a savings account 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.

What does 5% APY mean?

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.

What is the highest APY savings account in India?

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.

How does compounding frequency affect APY?

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.

Is APY the same as compound interest?

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.

What is the daily APY formula?

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.

How do I calculate monthly interest from APY?

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.

What is APY on a fixed deposit (CD) in India?

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.

What does 4% APY mean if compounded daily?

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.

How does 7-day APY 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, a CA portal for Tax Optimization Reports, 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.

APY Calculator: Annual Percentage Yield Calculator

What Is APY (Annual Percentage Yield)?

APY (Annual Percentage Yield) is the real annual return on a deposit after accounting for compound interest. It is always equal to or greater than the nominal interest rate, because it captures the interest earned on previously credited interest.

The key distinction from a simple interest rate: APY tells you exactly how much your money will grow in one year, regardless of how often the bank credits interest. Two accounts offering the same 4.5% nominal rate will have different APYs if one compounds daily and the other compounds quarterly.

In India, savings account interest is calculated using the daily balance method as mandated by the Reserve Bank of India since 2010. Fixed deposits use quarterly compounding under RBI guidelines.

Savings Account Interest Calculator

See exact daily interest earned using the RBI daily balance method.

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APY Formula: How to Calculate Annual Percentage Yield

The APY formula converts any nominal interest rate and compounding frequency into a single comparable annual figure.

APY = (1 + r/n)^n - 1

Where:
  r = nominal annual interest rate (as decimal, e.g. 0.045 for 4.5%)
  n = number of compounding periods per year

Worked example: Rs 1,00,000 at 4.5% nominal rate, compounded daily (n=365).

APY = (1 + 0.045/365)^365 - 1 = (1.0001233)^365 - 1 = 1.04603 - 1 = 4.603%. At the end of one year, the balance is Rs 1,04,603 versus Rs 1,04,500 under simple interest -- a difference of Rs 103.

APY at 4.5% nominal interest across compounding frequencies
Compounding	Periods/Year (n)	Effective APY	Rs 1L grows to
Daily (365)	365	4.602%	Rs 1,04,602
Monthly (12)	12	4.594%	Rs 1,04,594
Quarterly (4)	4	4.577%	Rs 1,04,577
Semi-Annual (2)	2	4.551%	Rs 1,04,551
Annual (1)	1	4.500%	Rs 1,04,500

APY vs APR: What Is the Difference?

APY (Annual Percentage Yield) measures what you earn on deposits. APR (Annual Percentage Rate) measures the cost of borrowing. Both are annual percentages, but only APY includes the full effect of compounding.

The Reserve Bank of India mandates APR disclosure on all retail loans under the Fair Lending Practices Code, making it the standard cost-of-credit metric in Indian banking.

APY vs APR: side-by-side comparison
Feature	APY	APR
What it measures	Earnings on deposits	Cost of a loan
Includes compounding?	Yes	No (usually)
Higher is better when	You are depositing	You are borrowing
Example at 4.5%	4.603% effective (daily)	4.5% stated (no compounding)
India regulation	RBI daily balance method	RBI Fair Lending Practices Code

How Compounding Frequency Affects APY

More frequent compounding raises the effective APY for any given nominal rate. The difference between annual and daily compounding at typical savings rates is small in absolute terms but compounds meaningfully over decades.

For Rs 10,00,000 at 6% nominal rate held 20 years: annual compounding produces Rs 32,07,135 while daily compounding produces Rs 33,20,117 -- a Rs 1,12,982 difference from compounding alone.

Best APY for Savings Accounts in India

Savings account interest rates in India range from 2.70% at SBI to 7.25% at select small finance banks as of July 2026. The higher rates from newer banks reflect their deposit-gathering strategy.

Savings account interest rates as of July 2026. Verify on each bank's official site before depositing.
Bank	Rate (p.a.)	Balance Tier	Type
Yes Bank	7.00%	Up to Rs 1 crore	Private
IDFC First Bank	7.00%	Up to Rs 1 crore	Private
AU Small Finance Bank	7.25%	Above Rs 10 lakh	SFB
Equitas SFB	7.00%	Select tiers	SFB
Kotak Mahindra Bank	4.00%	Above Rs 1 lakh	Private
IndusInd Bank	4.00%	Flat	Private
Axis Bank	3.50%	Above Rs 50 lakh	Private
ICICI Bank	3.00%	Above Rs 50 lakh	Private
HDFC Bank	3.00%	Above Rs 50 lakh	Private
SBI	2.70%	Below Rs 50 crore	PSB
PNB	2.70%	Flat	PSB

APY for Fixed Deposits in India

Indian fixed deposits use quarterly compounding under RBI guidelines. A 7.00% FD rate therefore has an effective APY of approximately 7.186%, not 7.00%.

Use the Bank Interest Rate Comparison Calculator to compare FD rates across 12 banks and see the effective APY and maturity amount for any deposit.

For calculating FD maturity with compounding: use the FD Calculator which applies the exact quarterly compounding formula and shows year-by-year FD growth.

Bank Interest Rate Comparison

Compare FD rates, savings rates, and loan rates across 12 Indian banks in one table.

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How to Use This APY Calculator

APY Calculator tab: enter your principal, APY rate, and investment tenure. The calculator shows total interest, monthly interest, effective monthly rate, and a year-by-year growth table.
APY to APR tab: enter your APY and select a compounding frequency. The table shows the equivalent APR for all five compounding periods simultaneously.
APR to APY tab: enter the stated APR on your loan or deposit. The calculator converts it to effective APY for each compounding frequency, so you can compare apples to apples.
Rate Comparison tab: set your principal and tenure once, then compare up to 6 different APY rates side by side. Edit any rate cell directly. The best rate is highlighted.

Limitations of APY as a Measure

Rates change without notice. Banks can revise savings account rates any time the RBI changes the repo rate or at their discretion. An APY that looks attractive today may drop within months.

APY does not account for taxes. Savings account interest above Rs 10,000 per year is taxable as income under Section 80TTA. FD interest above Rs 40,000 attracts 10% TDS. The after-tax return is what you actually keep.

APY ignores deposit insurance limits. DICGC insures bank deposits up to Rs 5 lakh per depositor per bank. Small finance banks offering high APYs may carry higher credit risk than PSBs.

APY does not compare across asset classes. A 7% APY savings account and a 7% CAGR mutual fund are not equivalent. The mutual fund return includes market risk and is not guaranteed. Use the Compound Interest Calculator to model riskier compounding scenarios.

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Frequently Asked Questions

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.

Disclaimer: All calculations on this page are indicative only. APY is a mathematical measure of the effect of compounding on a stated interest rate and does not predict future returns. Bank interest rates change without prior notice. This calculator is for educational and planning purposes only and does not constitute financial advice. Verify all rates on the respective bank's official website before making any deposit decision. Consult a SEBI-registered investment adviser before making investment decisions.