Most of the fixed deposits are below Rs 15 lakh and the most preferred FD tenor is 1-3 years in Q1FY24, according to a report by Kotak Institutional Equities.
“Consumers continue to exhibit a strong preference to place deposits in the 1-3-year category. A part of it can probably be explained by the interest rates offered where the interest rate differential is probably pushing back consumers in placing longer term deposits,” the report says.
Further, lenders are also a “lot more comfortable in this bucket given that the linkages to loan yields are getting broken with the introduction of EBLR-linked loans.”
The report looks at the recent RBI updates on quarterly deposits. It says that while deposit mobilisation by banks remained skewed in the 1-3-year bucket and it continues to rise consistently, there is around 10% point jump in 7-8% interest rate bucket.
Also Read: My Provident Fund account balance is Rs 14 lakh. Should I withdraw it to pay home loan?
Increase in buckets contracted at higher interest rates
As per the report, key takeaways from the RBI’s report on term deposits are following
1. The share of individuals in the overall term deposits is unchanged qoq at ~50% of the overall term deposits.
2. 80% of the overall term deposits come from urban/metropolitan markets. The share is higher for term deposits from non-individuals.
3. The trend on average ticket size of term deposits shows an upward bias of ticket size. 80% of the overall term deposits is either in Rs 0.1-1.5 million or more than Rs 10 million
4. Term deposits are mobilized mostly in the 1-3-year bucket window. “This share is the highest that we have witnessed since ~2000 and is still on an upward trend. The trend of this window being preferred is fairly uniform across regions.”
5. 35-40% of the deposits are still in the 7-8% interest rate bucket. This has seen a 10 percentage points increase in 1QFY24.
