Fixed Deposit
Bank FD rates surge to 9.5%, now 47% of FDs held by senior citizens
New Delhi/IBNS: Bank fixed deposit (FD) interest rates have touched 9.5 percent, which is a significant development for the investors who believe in FDs as a critical foundation in their investment portfolio.
Meanwhile, the financial domain is witnessing a remarkable shift, especially among senior citizens who now hold 47 percent of all FDs, while in contrast, median age of all investors in capital markets is now 32 years, with around 40 percent of investors being less than 30 years old.
An SBI Research report dated August 19, 2024, stated that banking sector deposit growth since FY22 is at Rs 61 trillion, outpacing credit growth at Rs 59 trillion.
"Myth of flagging deposit growth does not stand data scrutiny…CASA deposits are prone to UPI transactions and thus could be moving across the banking system," the report said.
"Growth in Reserve Money, Leakages from the Banking System and Regulatory dispensation could be holding up a faster deposit growth…Important to have a fair treatment of taxes on interest from deposits," as per the report.
According to reports, another interesting trend in banking system is the decline of CASA (Current Account Savings Account) deposits (41.0 percent in FY24 from 43.5 percent in FY23) as SB (Savings Bank) deposits declined even though it is somewhat aligned to pre-pandemic level of 42 percent.
Additionally with SB deposits now being used as a purely transaction motive and mostly for UPI transactions, the SB deposits now move across the banking system, due to which stability of SB could be an issue, reports Economic Times.
The Indian banking sector is facing a critical challenge as Finance Minister Nirmala Sitharaman and the Reserve Bank of India (RBI) Governor Shaktikanta Das recently urged lenders to strengthen their deposit base.
Despite the strong growth in lending fueled by corporate and individual demand, deposit growth has lagged behind, raising concerns about potential liquidity issues, according to Inventiva.
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