Lock-in period for tax saving fixed deposits to be reduced to 3 years? Here’s what public sector banks like SBI want

New guidelines for tax saving fixed deposits quickly? State Bank of India, together with different public sector lenders, are interesting to the federal government to allow them to provide incentives geared toward bolstering deposits. The drop in deposits has affected the movement of credit score.
According to an ET report, throughout FY24, the expansion in financial institution deposits lagged behind the rise in credit score, compelling banks to depend on costlier Certificates of Deposit (CDs) to shut the funding hole.
Banks have knowledgeable senior authorities officers in regards to the slowdown in deposit development. “One suggestion is that the lock-in period for tax-saving fixed deposits should be reduced to three years from five years,” a senior financial institution govt was quoted as saying.
Bankers have identified that traders are favoring equities, mutual funds, and tax-saving equity-linked financial savings schemes (ELSS), thanks to their spectacular returns. These options even have a five-year lock-in period.

Reducing the lock-in period for tax-saving fixed deposits to three years might assist deal with this imbalance, in accordance to bankers.
In FY24, combination deposits grew by 12.9%, whereas financial institution credit score rose by 16.3%. This shift is attributed to traders searching for different choices for their cash.
The proportion of deposits within the gross monetary financial savings of households declined from 6.2% of gross nationwide disposable earnings (GNDI) in FY21 to 4% in FY23. During the identical period, funding in shares and debentures elevated from 0.5% to 0.8%.
(*3*) one other financial institution govt stated.
Also Read | Home Loan Money Saving Tip: How to repay a Rs 50 lakh residence mortgage in lower than 10 years
Data from the Association of Mutual Funds in India (AMFI) exhibits that the trade’s belongings below administration (AUM) have greater than doubled, from Rs 24.79 lakh crore on April 30, 2019, to Rs 57.26 lakh crore on April 30, 2024.
Banks argue {that a} wholesome credit-deposit (CD) ratio is essential for supporting the economic system and funding giant infrastructure tasks. According to latest knowledge, the CD ratio has been hovering round 80% since September 2023, up from 75.8% in FY23.