Term savings plans became increasingly popular in the last year, as their share in the overall bank deposits rose to 60.3 per cent in December 2023, up from 57.2 per cent in March 2023, data from the Reserve Bank of India revealed. The data showed that a rise in interest rates pushed people to opt for more term savings plans.
The term deposits contributed to about 97.6 per cent of the overall deposits during the April to December period in 2023 on an incremental basis, while the current account and savings account (CASA) deposits saw a decline, the Quarterly BSR-2: Deposits with Scheduled Commercial Banks - December 2023 from the RBI revealed. The study revealed that a surge in return on term deposits has led to the change in the composition of the bank deposits, reported PTI.
The banking regulator observed that deposits in the higher interest rate segments became more popular, as the contribution of term deposits including interest rate of more than 7 per cent climbed to 61.4 per cent of the overall term deposits in December 2023, against 57.4 per cent share in the preceding quarter and 33.7 per cent in March 2023.
Notably, the central bank has maintained the status quo on repo rate at 6.5 per cent since almost a year now. The benchmark interest rate was revised upwards last in February 2023 to 6.5 per cent from 6.25 per cent, owing to inflation led by global events.
Earlier in May 2022, the RBI’s monetary policy committee hiked the policy rate by 40 basis points and this was followed by rate hikes in the subsequent meetings till February 2023. During this period, the repo rate surged by 250 basis points collectively.
The data revealed that about two-thirds of the incremental term deposits during the October-December 2023 period ranged in the size of Rs 1 lakh to under Rs 1 crore.