Report Reveals Higher Deposit Rates for PSBs, Senior Citizens Embrace Banking

In a recent report by the State Bank of India (SBI), it has been highlighted that public sector banks (PSBs) in India have experienced a more substantial increase in deposit rates compared to private banks. Additionally, there has been a significant jump in deposits made by senior citizens. This development signifies the growing confidence of both banks and depositors in the Indian banking system. Let’s delve deeper into the findings of the report.

Deposit Rate Hike for PSBs:

The report reveals that PSBs have been successful in raising deposit rates, despite the Reserve Bank of India (RBI) holding the rate since February 2023. The aggressive approach by select banks to attract deposits, coupled with fluctuating liquidity constraints, prompted the banking system to raise the deposit rates in the second half of the fiscal year. All scheduled commercial banks (ASCBs) increased their weighted average domestic term deposit rates on outstanding deposits, as well as on fresh deposits. However, the pass-through to these rates was higher for PSBs compared to private sector banks (PVBs).

The Rise of Senior Citizen Deposits:

One of the notable trends highlighted in the report is the significant increase in deposits made by senior citizens. This can be attributed to several factors. Firstly, the rise in deposit rates has provided higher interest rate differentials for senior citizens, making bank deposits an attractive investment option for them. Furthermore, the introduction of special deposit schemes for senior citizens, such as the WE-CARE scheme by SBI, has further propelled the growth in deposits from this demographic.

According to the report, there are approximately 74 million term deposit accounts held by senior citizens in India, with a total deposit amount of Rs 34 lakh crores. Out of these accounts, nearly 73 million accounts have deposits up to Rs 15 lakh. The report estimates that senior citizens earned an interest of around Rs 2.6 lakh crores on their bank deposits, assuming an average interest rate of 7.5%.

Government Initiatives and Support:

Recognizing the challenges faced by senior citizens in their sunset years, the Government of India has implemented various measures to support them. Specialized schemes like the Senior Citizen Savings Scheme (SCSS) offer superior interest rates, currently at 8.2% return on investment with approximately Rs 1.62 lakh crore outstanding. Additionally, card rates of banks catering to senior citizens have a markup of 50-75 basis points (bps). The government has also raised the threshold of Tax Deducted at Source (TDS) on deposits for senior citizens to Rs 50,000, further incentivizing deposit mobilization for this demographic.

The SBI report highlights the positive developments in the Indian banking sector, particularly for PSBs and senior citizens. The increase in deposit rates for PSBs demonstrates their competitiveness in attracting deposits and meeting the credit demands of the economy. The surge in senior citizen deposits and the government’s supportive initiatives reflect the growing trust of this demographic in the banking system. These trends bode well for the overall stability and growth of the banking sector, providing a solid foundation for India’s economic progress.

Disclaimer: This article is based on the findings of a report by the State Bank of India (SBI) and is for informational purposes only. Readers are advised to refer to the original source for accurate and up-to-date information.

The latest fixed deposit rates for the State Bank of India as of 2024 are as follows:

• For deposits below Rs. 2 crore:
  • 7-45 days: 3.5% (4% for seniors)
  • 46-179 days: 4.75% (5.25% for seniors)
  • 180-210 days: 5.75% (6.25% for seniors)
  • 1-2 years: 6.8% (7.3% for seniors)
  • 2-3 years: 7% (7.5% for seniors)
  • 3-5 years: 6.75% (7.25% for seniors)
  • 5-10 years: 6.5% (7% for seniors)

For more detailed information, you can visit the SBI official website or check out the latest reports on sites like ClearTax or PolicyBazaar

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