What comes to your mind when you hear – Fixed Deposits? You might think of words like simple, safe and steady returns. I’m sure everyone of you reading this newsletter would have invested in Fixed Deposits at some point in your lives. Although in the last couple of decades newer avenues of investing that have become prominent, Indians still harbour a lot of love for Fixed Deposits. And that shows in data. When I looked at this data, I was surprised and I’m sure you will be too.
Here are some charts which shows India’s love story with FDs.
How much bank deposits are there in India
Out of 190 Lakh Cr, 63 Lakh Cr parked in Savings account (at very low interest rates) and a huge sum of 108 Lakh Cr are invested in Fixed Deposit account.
108 Lakh Cr. invested in Fixed Deposits
The outstanding investment in FDs amounted to Rs. 108 Lakh Cr which is a huge ~40% of India’s GDP. Compared to FDs, the total AUM of the Mutual Fund industry as on Mar’23 was less than 40L Cr.
Which Banks do Indians prefer investing in?
PSU sector banks win the competition hands down in this. Due to wider reach of PSUs and their perception of trust, 60% of all Bank deposits are opened in PSU banks. If you’re invested in FDs of Small Finance Banks, you can consider yourself in the 1% category.
Which state invests the most in FDs
Maharashtra, owing to the financial capital of India i.e. Mumbai, leads the states when it comes to the cumulative FDs outstanding. No other state comes even close.
Investments in Fixed Deposits has become 10x in 18 Years
This is a testament to the fact that Indians find investing in FDs very comforting. Despite interest rates on FD dipping to as low as 5.5% in 2021 and 2022, we have seen a significant rise in the amount of money invested in FDs.
Fixed deposits are like those simple friends who you get the most comfort with, even though they have a few drawbacks. Arguably, this is the easiest savings instrument to understand and hence it’s a favourite of senior citizens who rely on the regular interest income from these FDs (also senior citizens get a higher interest rate). With banks requiring more funds and the interest rates in the economy going up, after many years, we are seeing interest rates on Fixed Deposits above 7%.
Looking to invest in FDs?
While the big PSU and Pvt. Sector banks offer interest rates in the range of 6.5-7.5%, Small Finance banks often give a much higher interest rate which can be in the range of 8-9.1%. Small Finance Banks are similar in many ways to the large Commercial banks and are also regulated by RBI, which means they are constantly monitored. Additionally, all bank deposits are insured by DICGC (which is an RBI company) upto Rs. 5 Lakh per PAN per Bank. In case you are looking to invest in FDs, you must definitely consider investing in FDs of SFBs.
So, what are your thoughts on investing in Fixed Deposits? Are you also looking for higher returns on FDs? Do email me with your thoughts.
I hope you enjoyed reading this newsletter.
Till the next time,
Vijay
CEO – InCred Money
