Bank customers are increasingly withdrawing money from their low interest savings accounts and getting FDs done. This is because at present the difference in interest rates on savings accounts and fixed deposits has reached the highest level in three years.
Bank customers are increasingly withdrawing money from their low interest savings accounts and making FDs. This is because at present the difference in interest rates on savings accounts and fixed deposits has reached the highest level in three years. This step has created trouble for banks, as their cost of deposits is continuously increasing. Due to rising interest rates, more people than ever are getting attracted towards fixed savings schemes. The share of such investment vehicles in total bank deposits has increased to 60.3 percent in December 2023. This information has been received from the data of Reserve Bank of India (RBI). This figure was 57.2 percent in March 2023.
Decline in savings scheme
In the increase in total deposits during April-December, 2023, the share of fixed deposits was about 97.6 percent. During this period, the share of current account and savings account (CASA) deposits declined. RBI gave this information in its ‘Quarterly Basic Statistics Returns (BSR)-2: Deposits in Scheduled Commercial Banks – December 2023’. It said that rising returns on fixed deposits are bringing structural changes in bank deposits. The share of fixed deposits in total deposits increased from 57.2 percent in March, 2023 to 60.3 percent in December, 2023.
RBI further said that funds are being deposited in the higher interest rate category. The share of fixed deposits with interest rates above seven percent in total term deposits increased to 61.4 percent in December 2023. This figure was 54.7 percent a quarter before and 33.7 percent in March 2023.
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