More People Investing in Term Deposits Due To Higher Interest Rates: RBI

As more individuals become aware of their financial situation and the variety of investment plans available to them, they are selecting the most suitable ones in order to maximize their return on investment (ROI). When investing their hard-earned cash, investors seek high rates of return. Investing in a term deposit entails making a one-time or ongoing payment into an account at a financial institution.

Term deposits typically have short-term maturities of a month to a few years and minimum deposit requirements that vary in duration. Investors should be aware that they may only withdraw their money once the term has ended when they purchase a term deposit.

Depending on how long an investment is held, term deposits may be divided into short-term and long-term categories. For the short-term deposit, the lock-in period may extend from one to twelve months. These deposits are perfect for investors seeking quick profits. On the other hand, long-term deposits have a lock-in period of one to 10 years. These deposits have a greater interest rate than short-term deposits.

According to statistics from the Reserve Bank of India, by December 2023, the share of these investment vehicles to total bank deposits had increased to 60.3%. This proportion was 57.2 percent in March 2023.

When examined gradually, term deposits made up about 97.6% of all deposits from April to December 2023. During this period, there was a decline in the proportion of deposits put into current and savings accounts (CASAs). This data was taken from the RBI’s Quarterly Basic Statistics Returns BSR-2: Deposits in Scheduled Commercial Banks-December 2023 report.

The RBI said that money is being placed in the category with higher interest rates. By December 2023, the percentage of term deposits having interest rates greater than 7% rose to 61.4% of all term deposits. This statistic was 33.7% in March 2023 and 54.7% a quarter earlier. According to the central bank, while women’s percentage of overall credit is still small, it is growing rapidly. The increase in loans made to males over the previous seven quarters has been overshadowed by this.

Investing in a term deposit entails making a one-time or ongoing payment into an account at a financial institution. Term deposits typically have short-term maturities of a month to a few years and minimum deposit requirements that vary in duration. Investors should be aware that they may only withdraw their money once the term has ended when they purchase a term deposit. The account holder may, under certain conditions, allow an early withdrawal if the investor informs them several days in advance. There will also be a cost associated with early termination.