Elderly fixed deposits skyrocket 143% in 5 years, totalling Rs 34 lakh crore

Elderly Savings Surge: Senior citizens' fixed deposits have soared by 143 per cent over the course of five years, fuelled by various factors contributing to this surge. The country currently boasts approximately 74 million term deposit accounts held by senior citizens, collectively amounting to Rs 34 lakh crore, according to the SBI Research Ecowrap report.

These accounts have witnessed a notable uptick in their average balance, swelling by 38.7 per cent from Rs 3.3 lakh crore to Rs 4.6 lakh crore. The surge in deposit rates, coupled with a wider interest rate gap for senior citizens, along with the introduction of special deposit schemes by banks, has catalysed this notable rise in deposits amongst senior citizens.

State sparks senior savings

Government initiatives have also played an important role in boosting this trend, particularly through measures such as expanding the limit and rate under schemes like the Senior Citizen Savings Scheme (SCSS) and the Mahila Samman Savings Certificate.

The report highlights the growth trajectory in senior citizen deposits, with the number of accounts swelling by 81 per cent and the deposit amount skyrocketing by 143 per cent over the past five years. Notably, banks have been enticing senior citizens with offers such as an additional 50 basis points over the card rate for the general public, alongside the introduction of special fixed deposit schemes with higher interest rates tailored for senior citizens.

In light of the recent monetary policy decisions, where the Reserve Bank of India (RBI) has maintained the repo rate at 6.5 per cent, banks have intensified their efforts to attract deposits by increasing interest rates. Public Sector Banks (PSBs) have emerged as frontrunners in this endeavour, offering competitive rates to depositors, thereby reshaping depositors' behaviour to capitalise on interest rate differentials between core and term deposits.

Grey gold revenue

The report also sheds light on the substantial contribution of senior citizen deposits to the economy, estimating a total interest earned of Rs 2.7 lakh crore, with a significant portion emanating from senior citizen bank deposits. This influx of deposits is anticipated to generate substantial tax revenue for the government, with an estimated tax payment of around Rs 27,106 crore from senior citizen deposits alone.

Furthermore, the banking sector has witnessed robust growth in the latter half of the fiscal year, with increases observed in bank credit and aggregate deposits. Notably, PSBs have led the charge by offering optimal rates to depositors, aligning with the escalating credit demands from the economy. This shift in depositors' behaviour underscores a preference for capitalising on interest rate differentials between core and term deposits, with term deposits accounting for a substantial share of the overall deposits.