‘Senior Citizens’ share in fixed deposits doubles to 30% since FY19: Study

In Mumbai, a recent study conducted by the State Bank of India (SBI) has revealed a significant increase in the reliance of senior citizens on fixed deposits (FDs). According to the study, the share of senior citizens in FDs has doubled from 15% to 30% since FY19, indicating a growing preference for fixed-income investments among this demographic.

The report emphasizes the importance of enhancing financial independence for senior citizens and suggests several measures to support them. It recommends waiving taxes on interest earned from FDs and doubling the ceiling of the Atal Pension Yojana to Rs 10,000, aiming to provide seniors with greater financial security and stability.

Despite tight liquidity conditions, banks have responded to the rising demand for credit by increasing deposit rates in the latter half of FY24. This move aims to attract fresh deposits, even though the Reserve Bank of India (RBI) has maintained its rates since February 2023.

The study, authored by Soumya Kanti Ghosh, the chief economist at SBI, highlights the significant growth in senior citizen FD accounts and deposits. The number of senior citizens FD accounts has surged by 81% from 4.1 crores in FY19 to 7.4 crores, with deposits totalling Rs 34 lakh crore, marking a 150% increase in value since FY19.

The government’s initiatives, such as the senior citizen savings scheme and preferential interest rates offered by banks, have played a crucial role in attracting senior citizens to FDs. Additionally, the report acknowledges the positive impact of increasing the tax deduction threshold on deposits for senior citizens to Rs 50,000, providing them with additional income.

Furthermore, the study reveals that public sector banks (PSBs) have witnessed a higher pass-through to term deposits on fresh and outstanding deposit rates compared to private sector banks (PVBs). As a result, the incremental share of FDs has increased to 93% (estimated), while the share of current account and savings account (CASA) deposits has declined to 7% in FY24.

Overall, the findings of the SBI study underscore the growing significance of FDs among senior citizens and the need for supportive policies to ensure their financial well-being in the long term.