Good news for Taxpayers: The government has suggested to the Public Sector Banks (PSBs) that they should give some relief to the taxpayers on tax saving fixed deposits. In such a situation, it is expected that an announcement regarding this is also possible in the Union Budget 2024.
The new government has started implementing the 100-day action plan. Plans are being shared in different sectors. Departments like Agriculture, Road and Transport Ministry have announced it. Now it is the turn of the banks. Banks can soon give good news to the taxpayers. The government has suggested to the Public Sector Banks (PSBs) that they should give some relief to the taxpayers on tax saving fixed deposits. In such a situation, it is expected that an announcement regarding this is also possible in the Union Budget 2024. This is intended to boost the deposit growth of banks. Recently, many banks have also increased the interest rates of FDs.
What gift will taxpayers get?
The new government has suggested to the public sector banks to reduce the lock-in period of tax saving FDs from 5 years to 3 years. The government suggests that this will accelerate the deposit growth of banks. Also, the interest received on FDs will once again attract people towards this traditional investment. Since last year, there has been more credit growth than deposit growth in banks. Recently, most banks have also increased the interest rates of FDs to increase deposit growth.
Why is it suggested to do so?
Investors are liking stock market, mutual funds and Tax saving equity linked saving schemes more than Tax Saving FDs. Here the interest is also high and there is no hassle of lock-in period. PSU banks hope that by making the lock-in period of Tax saving FDs to 3 years, investors will once again get a chance to be drawn towards this. Last year, in 2023-2024 i.e. FY24, while the deposit growth in banks was 12.9%, the credit growth was 16.3%. In FY23, as compared to FY21, the investment of Indian investors in the stock market and bond market has increased from 0.5% to 0.8%. At the same time, deposits in banks have come down from 6.2% to 4%.
Decreasing deposit growth is a tension for banks
According to AMFI (Association of Mutual Funds), the AUM (Assets under management) of mutual fund companies increased from 24.79 lakh crores in April 2019 to 52.76 lakh crores by April 20, 2024. Increasing credit growth and decreasing deposit growth is a matter of concern for banks. Because, banks have to raise money from the market, due to which loans are also expensive. With increasing loans and demand for infrastructure, the credit deposit ratio is a big concern for banks. According to the data, the credit deposit ratio has increased from 75.8% to 80% by September 2023 as compared to the year 2022-2023.
