Rising interest rates prompt more people to opt for term deposits | Top Vip News

Rising interest rates appear to be prompting more people to opt for term savings plans as the share of such instruments in total bank deposits rose to 60.3 percent in December 2023 from 57. .2 percent in March 2023, according to Reserve Bank data. Incrementally, term deposits accounted for nearly 97.6 per cent of total deposits during April-December 2023 and the share of deposits in current accounts and savings accounts (CASA) declined, the quarterly BSR-2 of the RBI: Deposits in scheduled commercial banks. – December 2023.

“The rise in the yield on term deposits has been driving the change in the composition of bank deposits: the share of term deposits in total deposits increased to 60.3 percent in December 2023 from 57.2 percent in March 2023,” he said. The RBI further said that deposits moved to higher interest rate categories as the share of term deposits with interest rate above 7 per cent increased to 61.4 per cent of total term deposits in December 2023 from 54.7 percent a quarter ago and 33.7 percent in March 2023.

For almost a year now, the Reserve Bank has kept the short-term lending rate or repo rate at 6.5 per cent. The benchmark interest rate was last raised in February 2023 to 6.5 percent from 6.25 percent due to inflation driven mainly by global developments. In an off-cycle meeting in May 2022, the RBI’s Monetary Policy Committee raised the policy rate by 40 basis points and was followed by rate hikes of various sizes, in each of the five subsequent meetings up to February 2022. 2023. The repo rate was increased by 250 basis points cumulatively between May 2022 and February 2023.

RBI’s quarterly BSR data also showed that nearly two-thirds of incremental term deposits during October-December 2023 were of the size of “Rs 1 lakh to less than Rs 1 crore”. The corresponding proportion in the previous quarter was 46.5 percent. Female clients contributed significantly to the accumulation of deposits. Their share in CASA’s incremental, term and total deposits during October-December 2023 was 63.4 percent, 36.1 percent and 40.1 percent, respectively.

Their share in total deposits increased to 20.6 percent in December 2023 from 20.2 percent in September 2023. Senior citizens held 20.1 percent of total deposits in December 2023.

Another set of quarterly data showed that credit to industry increased by 9.5 percent (year-on-year) in December 2023, which was comparable to the growth a year ago. Personal loans continued to expand and their share in total credit stood at 30.9 percent in December 2023 (28.6 percent the previous year).

The RBI said the share of women borrowers in total credit is relatively low, but it is growing at a solid pace and has outpaced the growth in lending to male borrowers in the last seven quarters.