Rising interest rates have led more people to opt for term savings plans, increasing their share in total bank deposits from 57.2% in March 2023 to 60.3% in December 2023, according to the Reserve Bank. Term deposits accounted for nearly 97.6% of total deposits from April to December 2023, while current and savings account deposits decreased. The shift towards term deposits was driven by higher returns. Deposits with interest rates over 7% rose to 61.4% in December 2023. The Reserve Bank has maintained the short-term lending rate at 6.5% for almost a year, last raising it in February 2023 due to inflation. The Monetary Policy Committee raised rates in May 2022 and in subsequent meetings till February 2023. Female customers contributed significantly to deposit growth, with 63.4% of incremental CASA and 36.1% of term deposits coming from them. Senior citizens held 20.1% of total deposits in December 2023. Credit to the industry increased by 9.5% year-on-year, while personal loans grew to 30.9% of total credit. The share of women borrowers is growing rapidly, outpacing loans to male borrowers over the last seven quarters.
What is “Term Deposits”?
Answer- Term Deposits, popularly known as Fixed Deposit or Recurring Deposit, is an investment instrument in which a lump-sum sum amount or monthly sum is deposited at an agreed rate of interest for a fixed period of time, ranging from 1 month to 10 years.
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