You are here: Home » Finance » News » Banks

Interest earned by Indians on bank deposits at record low

Interest rates on a normal savings account have remained constant under the NDA government at 4 per cent

The amount of interest earned by millions on their small savings and fixed deposit accounts has hit an all-time low. This has been revealed in the Indian Public Statistics for 2015-16, released by the ministry on Thursday.

The on a normal savings account have remained constant under the government at four per cent. With consumer inflation above five per cent in August this year, a regular savings account holder is actually losing money.

While savings account rates were a constant, there has been a decline in all other term rates. A fixed deposit for three years was earning an interest rate of 8.4 per cent under the erstwhile regime and first year of the government. However, over the last year, the on such deposits have declined by a per cent. Those with one and two-year maturities now earn 7.1 per cent and 7.2 per cent, respectively. The popular tax saving and long-term planning instrument of the middle class — the five-year fixed deposit — now carries an interest rate of 7.9 per cent, instead of 8.4 per cent a year ago. At the start of the 21st century, the interest earned on a fixed deposit was more than 11 per cent.

Those looking to save for a car or a honeymoon with a recurring deposit too have been left in the lurch. on these regular saving schemes are down by a per cent to 7.4 per cent, compared with last year.

Also hit hard in this low-interest rate regime are retirees and senior citizens who rely on the monthly income scheme of India Post. The return on their savings is down to 7.8 per cent from a high of 8.5 per cent during UPA-II. The (SCSS) rates have fallen by close to a per cent as compared to 9.3 per cent last year.

People looking to save tax and accumulate money for a future exigency through the (NSC) have also been impacted. Not only did the government discontinue the high interest yielding 10-year in December 2015, the on five-year NSCs too have fallen to 8.1 per cent, compared with 8.5 per cent last year.

(PPF), the preferred post-retirement corpus of millions of Indians, now gives 8.1 per cent interest to depositors, compared with 8.7 per cent in the previous year.

Minister Arun Jaitley has been advocating for lower as a measure to reinvigorate investment in India. Jaitley’s logic is this — if pay their depositors less interest, they would be able to lend at lower rates to businesses, which would encourage them to borrow more, invest more and, in the process, create more jobs for 13 million Indians entering the workforce every year.

But haven’t really reduced the rates at which they lend while reducing the interest they pay to depositors. Despite the fact that the RBI, under Raghuram Rajan, had cut its benchmark rates by 1.5 per cent since 2015.

One of the reasons for the banks’ behaviour is their astronomical non-performing assets (NPAs) that have touched Rs 5.4 lakh crore in 2016. N R Bhanumurthy of the National Institute of and Public Policy says, “have reduced in a bid to clean their books. If cannot recover their loans from defaulters like Kingfisher Airlines, then the losses will have to be offset by reducing the interest rate on the savings of ordinary depositors.”

image
Business Standard
177 22
Business Standard

Interest earned by Indians on bank deposits at record low

Interest rates on a normal savings account have remained constant under the NDA government at 4 per cent

Sai Manish  |  New Delhi 

Shutterstock
Shutterstock

The amount of interest earned by millions on their small savings and fixed deposit accounts has hit an all-time low. This has been revealed in the Indian Public Statistics for 2015-16, released by the ministry on Thursday.

The on a normal savings account have remained constant under the government at four per cent. With consumer inflation above five per cent in August this year, a regular savings account holder is actually losing money.


While savings account rates were a constant, there has been a decline in all other term rates. A fixed deposit for three years was earning an interest rate of 8.4 per cent under the erstwhile regime and first year of the government. However, over the last year, the on such deposits have declined by a per cent. Those with one and two-year maturities now earn 7.1 per cent and 7.2 per cent, respectively. The popular tax saving and long-term planning instrument of the middle class — the five-year fixed deposit — now carries an interest rate of 7.9 per cent, instead of 8.4 per cent a year ago. At the start of the 21st century, the interest earned on a fixed deposit was more than 11 per cent.

Those looking to save for a car or a honeymoon with a recurring deposit too have been left in the lurch. on these regular saving schemes are down by a per cent to 7.4 per cent, compared with last year.

Also hit hard in this low-interest rate regime are retirees and senior citizens who rely on the monthly income scheme of India Post. The return on their savings is down to 7.8 per cent from a high of 8.5 per cent during UPA-II. The (SCSS) rates have fallen by close to a per cent as compared to 9.3 per cent last year.

People looking to save tax and accumulate money for a future exigency through the (NSC) have also been impacted. Not only did the government discontinue the high interest yielding 10-year in December 2015, the on five-year NSCs too have fallen to 8.1 per cent, compared with 8.5 per cent last year.

(PPF), the preferred post-retirement corpus of millions of Indians, now gives 8.1 per cent interest to depositors, compared with 8.7 per cent in the previous year.

Minister Arun Jaitley has been advocating for lower as a measure to reinvigorate investment in India. Jaitley’s logic is this — if pay their depositors less interest, they would be able to lend at lower rates to businesses, which would encourage them to borrow more, invest more and, in the process, create more jobs for 13 million Indians entering the workforce every year.

But haven’t really reduced the rates at which they lend while reducing the interest they pay to depositors. Despite the fact that the RBI, under Raghuram Rajan, had cut its benchmark rates by 1.5 per cent since 2015.

One of the reasons for the banks’ behaviour is their astronomical non-performing assets (NPAs) that have touched Rs 5.4 lakh crore in 2016. N R Bhanumurthy of the National Institute of and Public Policy says, “have reduced in a bid to clean their books. If cannot recover their loans from defaulters like Kingfisher Airlines, then the losses will have to be offset by reducing the interest rate on the savings of ordinary depositors.”

RECOMMENDED FOR YOU

Interest earned by Indians on bank deposits at record low

Interest rates on a normal savings account have remained constant under the NDA government at 4 per cent

Interest rates on a normal savings account have remained constant under the NDA government at 4 per cent
The amount of interest earned by millions on their small savings and fixed deposit accounts has hit an all-time low. This has been revealed in the Indian Public Statistics for 2015-16, released by the ministry on Thursday.

The on a normal savings account have remained constant under the government at four per cent. With consumer inflation above five per cent in August this year, a regular savings account holder is actually losing money.

While savings account rates were a constant, there has been a decline in all other term rates. A fixed deposit for three years was earning an interest rate of 8.4 per cent under the erstwhile regime and first year of the government. However, over the last year, the on such deposits have declined by a per cent. Those with one and two-year maturities now earn 7.1 per cent and 7.2 per cent, respectively. The popular tax saving and long-term planning instrument of the middle class — the five-year fixed deposit — now carries an interest rate of 7.9 per cent, instead of 8.4 per cent a year ago. At the start of the 21st century, the interest earned on a fixed deposit was more than 11 per cent.

Those looking to save for a car or a honeymoon with a recurring deposit too have been left in the lurch. on these regular saving schemes are down by a per cent to 7.4 per cent, compared with last year.

Also hit hard in this low-interest rate regime are retirees and senior citizens who rely on the monthly income scheme of India Post. The return on their savings is down to 7.8 per cent from a high of 8.5 per cent during UPA-II. The (SCSS) rates have fallen by close to a per cent as compared to 9.3 per cent last year.

People looking to save tax and accumulate money for a future exigency through the (NSC) have also been impacted. Not only did the government discontinue the high interest yielding 10-year in December 2015, the on five-year NSCs too have fallen to 8.1 per cent, compared with 8.5 per cent last year.

(PPF), the preferred post-retirement corpus of millions of Indians, now gives 8.1 per cent interest to depositors, compared with 8.7 per cent in the previous year.

Minister Arun Jaitley has been advocating for lower as a measure to reinvigorate investment in India. Jaitley’s logic is this — if pay their depositors less interest, they would be able to lend at lower rates to businesses, which would encourage them to borrow more, invest more and, in the process, create more jobs for 13 million Indians entering the workforce every year.

But haven’t really reduced the rates at which they lend while reducing the interest they pay to depositors. Despite the fact that the RBI, under Raghuram Rajan, had cut its benchmark rates by 1.5 per cent since 2015.

One of the reasons for the banks’ behaviour is their astronomical non-performing assets (NPAs) that have touched Rs 5.4 lakh crore in 2016. N R Bhanumurthy of the National Institute of and Public Policy says, “have reduced in a bid to clean their books. If cannot recover their loans from defaulters like Kingfisher Airlines, then the losses will have to be offset by reducing the interest rate on the savings of ordinary depositors.”
image
Business Standard
177 22

Upgrade To Premium Services

Welcome User

Business Standard is happy to inform you of the launch of "Business Standard Premium Services"

As a premium subscriber you get an across device unfettered access to a range of services which include:

  • Access Exclusive content - articles, features & opinion pieces
  • Weekly Industry/Genre specific newsletters - Choose multiple industries/genres
  • Access to 17 plus years of content archives
  • Set Stock price alerts for your portfolio and watch list and get them delivered to your e-mail box
  • End of day news alerts on 5 companies (via email)
  • NEW: Get seamless access to WSJ.com at a great price. No additional sign-up required.
 

Premium Services

In Partnership with

 

Dear Guest,

 

Welcome to the premium services of Business Standard brought to you courtesy FIS.
Kindly visit the Manage my subscription page to discover the benefits of this programme.

Enjoy Reading!
Team Business Standard