The tax measures announced in Budget 2025 are expected to push up bank deposits by Rs 42,000-45,000 crore, strengthening banks' lending capacity, financial services secretary M Nagaraju said on February 3.
A rise in deposits is expected on the back of higher savings among senior citizens, non-senior citizens, and taxpayers benefiting from the enhanced tax exemption limit of Rs 12 lakh, he said.
"We are expecting more than Rs 15,000 crore in additional bank deposits from senior citizens, based on current trends. Senior citizens hold about Rs 34 lakh crore in bank deposits, and since TDS directly influences deposit behaviour, this measure is expected to push deposits further," Nagaraju said, referring to tax deducted at source.
For non-senior citizens, the additional deposits are projected to be slightly above Rs 7,000 crore due to the tax incentives introduced in the Budget. However, the largest contribution — Rs 20,000 crore — is expected to come from the increase in the tax exemption limit to Rs 12 lakh.
"There is Rs 1 lakh crore revenue foregone. Out of that, we expect at least Rs 20,000 crore will come back to the banks. Everybody will not spend this additional income, some will be kept in fixed deposits. Altogether, we expect anywhere between Rs 42,000 crore and Rs 45,000 crore in additional bank deposits," Nagaraju said.
The surge in bank deposits will, in turn, enhance their ability to lend. "If deposits grow, especially in fixed deposits, banks will be able to lend more. With these measures, banks are expecting higher credit growth," he added.
The increase in deposits is expected to boost liquidity in the banking system, allowing banks to extend more loans to businesses and individuals.
With higher disposable income among taxpayers and improved savings, credit growth could see an upswing, supporting growth.
Key tax measures
Presenting the first full-year Budget of Modi 3.0, finance minister Nirmala Sitharaman on February 1 announced a raft of measures which will impact individual taxpayers across income groups. Here are the key tax changes:
No tax on annual incomes up to Rs 12 lakh (Rs 12.75 lakh for salaried taxpayers due to the standard deduction).
The TDS (tax deducted at source) threshold for senior citizens' fixed deposit interest income raised from Rs 50,000 to Rs 1 lakh.
The annual TDS limit on rental income increased from Rs 2.40 lakh to Rs 6 lakh, significantly reducing tax deductions for property owners with modest rental income.
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