Higher interest rates are making fixed deposits (FD) or term deposits (TD) more attractive for senior citizens in India. Bank have successfully transmitted the calibrated raise in policy rates to lenders and borrowers, aided by the regulator’s fiscal and policy measures.
Bank credit growth stood at 20.2% in 2024, while deposit accretion grew by 13.5% in FY24, with term deposits leading the game, according to a recent SBI Research Report.
The report further says senior citizens have been capitalizing on the interest rate differentials between core and term deposits, with the incremental share of term deposits increasing to 93% and the CASA share declining to 7% in FY24.
The rise in deposit rates, better interest rate benefits for senior citizens, and unique deposit schemes for them have resulted in a big change in the total deposits made by senior citizens. Currently, around 74 million senior citizens have term deposit accounts with a total deposit of about Rs 34 lakh crore.
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Government Schemes for Senior Citizens
The government provides schemes such as the Senior Citizen Savings Scheme (SCSS) and Mahila Samman Savings Certificate to encourage older citizen contributions. The senior citizen savings scheme allows them to deposit up to Rs. 30 lakh for five years, with an 8.2% rate of interest, tax benefits, and secure investments.
In addition to the Senior Citizen Saving Scheme, banks are also offering 50 bps over the card rate for the public. A few banks like SBI and HDFC have introduced a special tenure of fixed deposit scheme, which provides higher interest rates of 75 bps to senior citizens compared to normal card rates.
Senior citizens receive a total of Rs 2.7 lakh crore in interest, which comprises Rs 13,299 crore from the SCSS and Rs 2.5 lakh crore from senior citizen bank accounts. Assuming that older citizens pay 10% (average) tax, the government will get about Rs 27,106 crore in income from their deposits, according to the report.
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Another helpful scheme created by the government is the Atal Pension Yojana (APY), which aims to build a universal social security system for all Indians, particularly those who are poor, underprivileged, and unorganized workers.
The subscribers would receive the fixed maximum pension of Rs. 5,000 per month, with the scope to increase the maximum pension amount to say Rs. 10,000 per month for the benefit of senior citizens.
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Disclaimer: The above content is for informational purposes only. Please consult a SEBI-registered investment advisor before investing in market-linked instruments.
