SBI, peer PSU banks seek govt nod for incentives to beef up deposits: Report

Share of deposits in gross financial savings of households fell from 6.2 percent of gross national disposable income (GNDI) in FY21 to 4 percent in FY23

State Bank of India and a host of public sector lenders have sought the government approval to line up incentives to attract deposits after a steep decline in deposits widened the gulf with rise in credit flows, the Economic Times reported.

Since the deposit growth for banks was much below the rise in credit flows in FY24, the banks met the funding gap through higher-cost Certificates of Deposit (CDs), the report further stated.

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The banks have made representations to senior government officials flagging the slowdown in deposit growth. "One suggestion is that the lock-in period for tax-saving fixed deposits should be reduced to three years from five years," the report quoted a senior bank executive as saying.

The bankers said that because of big returns by equities, mutual funds and tax-saving equity-linked savings schemes (ELSS), investors prefer them rather than tax-saving fixed deposits (FDs).

All tax-saving schemes have a five-year lock-in period and so reducing the lock-in period for such FDs to three years will address this imbalance, bankers said, said the report.

Moneycontrol couldn't independently verify the report.

Share of deposits in gross financial savings of households fell from 6.2 percent of gross national disposable income (GNDI) in FY21 to 4 percent in FY23, the report said, adding that over this period, investment in shares and debentures increased from 0.5 percent to 0.8 percent. “Because of the exuberance in the Indian stock markets, investors have tilted more towards the same. This has an impact on deposit growth,” another bank executive was quoted in the report.

Also Read | Households' net savings hit multi-decade low in FY23