In the first quarter (April-June) of the current fiscal, Indian banks have seen demand deposits — savings and current deposits — rise for the first time in five years.
Demand deposits with Indian banks increased by 8% in the first quarter of this fiscal, while in the first quarters of previous years, demand deposits had witnessed a fall ranging from 2-6%, according to data from the Reserve Bank of India (RBI).
“Not many options are available for investors seeking safety for their investment,” said VR Iyer, executive director, Central Bank of India. “Bank deposits become an obvious choice for safe investments,” she said.
Demand deposit moved up from Rs. 6,00,000 crore at the end of April 2012 to Rs. 6,50,000 crore at the end of June, registering a rise of Rs. 50,000 crore.
In the previous fiscal, demand deposit declined 6% to Rs. 5,50,000 crore at end of June 2011 from Rs. 5,90,000 crore at the end of April 2011.
“In addition to safety, hike in interest rate on saving bank deposit has made them comparatively attractive,” said C Jayaram, joint MD, Kotak Mahindra Bank.
The RBI, in May 2011, had increased the savings bank deposit interest rates from 3.5% to 4%.
In October, RBI had deregulated the interest rate, after which some banks such as Yes Bank, Kotak Mahindra Bank and IndusInd Bank hiked interest on saving bank deposit to 7% to attract depositors.