Why Indians are moving money from savings accounts to FDs, according to RBI report
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500+ questions on Economy with explanations
📌 Summary:
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Composition of bank deposits in India shifted significantly over past 5 years per RBI's 'Annual Basic Statistical Return on Deposits'
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Share of savings deposits in aggregate bank deposits fell sharply from 34.6% (Mar 2022) to 28.7% (Mar 2026)
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Share of term/fixed deposits rose from 55.2% to 61.6% in the same period — depositors locking funds for higher returns
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Driver: rising interest rate environment makes FDs more attractive vs. low-yield savings accounts; also a flight-to-safety pattern amid market volatility
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Macro implications: cheap CASA deposits shrinking → cost of funds for banks rises → tighter NIMs; pressure on banks to compete via higher deposit rates; potentially slower transmission of policy rate cuts in future
🎯 UPSC Relevance: GS3 — Indian Economy (banking system, monetary transmission, household saving behaviour, financial intermediation).
📝 Prelims Facts:
- CASA = Current Account + Savings Account deposits; low-cost funding for banks
- Term/Time deposit: fixed-tenure deposit with penalty for premature withdrawal; eligible for tax benefit under Sec 80C if ≥5 years
- RBI's Annual BSR-1 captures deposit composition; BSR-2 captures credit composition
- Statutory rate corridor for banks: Repo Rate, SDF (lower bound), MSF (upper bound)
🔑 Key Term: CASA Ratio — share of Current and Savings Account deposits in a bank's total deposits; higher CASA = cheaper funding, healthier margins.
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