Term Deposit is one of the most popular savings instruments in the country. It comes in two forms - Fixed Deposit and Recurring Deposit.
Term Deposit is one of the most popular savings instruments in the country. It comes in two forms – Fixed Deposit and Recurring Deposit. Term Deposit and Fixed Deposit are often used synonymously. Term Deposit not just helps users in saving a part of their earnings but also earn interest on them over a period of time. Term Deposit comes with a declared rate of return, which a customer can lock at the time of opening the account. The customer’s final return depends on the rate of return at which s/he had started the account. It doesn’t vary even if the bank changes the interest rate of the scheme during the term of the customer’s account. That said, it is interesting to know that not all states of India get to enjoy the full benefits of the term/fixed deposit.
SBI Research’s latest ‘Ecowrap’ report reveals an interesting trend about Term Deposits. The report, which was released today, says people in well off states invest more in term deposits. The average per capita income of these states is higher than the national income. Also, these states have more elderly population.
“The % share of term deposits is higher mainly in the states with per capita income higher than the national average,” SBI Research report said.
According to the report, 65.9% of total deposits in Maharashtra are in the form of term deposits.
The situation is different in low-income states where people seems more oriented towards current and savings accounts (CASA) for their deposit.
“When we look at the state-wise data, we find that in the states with lower per capita income than national average the preference is more towards CASA deposits. The all India CASA deposits as % of Total deposits comes at 42.3% and all states (except West Bengal) in our sample have CASA deposit % higher than that.”
In Bihar, CASA accounts for 65% of total deposits.
“Among the states with per capita income lower than national average, the situation of per account savings and term deposits is more or less same but there is quite variation in per account current deposits (Rs 40,600 in Bihar compared to Rs 1.2 lakh in West Bengal),” said the report.
SBI Research report said states with “per capita income higher than national average have more elder population.” And these states depend more on term deposits compared to CASA deposits.
Overall, the total amount in term deposits across India is more than current account and savings account. The SBI report said that the “per account savings deposits is merely Rs 23,600, current deposits at Rs 1.4 lakh and term deposits at Rs 2.75 lakh. The overall per account deposits is Rs 59,800.”
The SBI analysis is based on RBI data for March 2018 period for 21 major states only.