That interest rate is because on average, rupee inflation has been at over 9% in the last two years, and was over 11% at the beginning of the year. http://www.tradingeconomics.com/india/inflation-cpi

If I'd opened a bank account last time I visited India, converted sterling to rupees, to saved in an Indian bank account at 12%, I'd end up less pounds than I started with.

Putting money in consumer banks in India really only makes sense if you live there.