The increase in deposit rates, the higher interest rate differential and the special deposit schemes for senior citizens have all propelled a "tectonic shift" in deposit accretion for this age group, according to the latest SBI Research report. In the past 5 years, there has been an increase of 81% growth in the number of senior citizens term deposits accounts and 143% in amount among them, the estimates suggest.

Deposit rates have moved up more for public sector banks compared to private banks even as the RBI has held rates. The overall bank credit growth accounted for 20.2% in 2024, which surged from 15% in FY23 and 8.6% in FY22, the data shows. The deposit accretion, in turn, picked up in the later part of the year, growing 13.5% in FY24 i.e. net ₹24.3 lakh crore, up from 9.6% in FY23 and 8.9% in FY22.

Overall, ASCBs have increased weighted average domestic term deposit rates (WADTDR) on outstanding deposits by 96 bps and weighted average term deposit rates on fresh deposits by 22 basis points across banking groups. "The pass-through to weighted average domestic term deposit rates (WADTDR) on fresh and outstanding deposit rates has been higher for public sector banks (PSBs) than private sector banks. PSBs have imbibed the competitive spirit in the true sense, offering optimal rates to discerning depositors as they galvanise to meet the surging credit demands from the economy," writes Soumya Kanti Ghosh, chief economist, SBI Research.

The SBI report says a palpable shift in depositors’ behaviours has been the inclination to capitalise on interest rate differentials between core and term deposits, with the incremental share of term deposits increasing to 93% and CASA share declining to 7% in FY24.

"We estimate that there could be now close to 74 million senior citizens term deposits accounts in the country, with aggregate deposit to the tune of ₹34 lakh crore. The share of senior citizen term deposits (by no. of accounts) increased to 30% now from 15% earlier in term deposits kitty! Out of such 74 million odd accounts, almost 73 million should be in the size bracket of up to ₹15 lakh. By assuming interest on senior citizen bank deposits being 7.5%, the interest earned would stand at ₹2.7 lakh crore during the year," writes Ghosh.

Interestingly, these 74 million accounts are a significant jump from that in FY19, when around 41 million senior citizens term deposits accounts were estimated in the country, with a total deposit of ₹14 lakh crore, says SBI Research. "So, in a short span of ~5 years, there has been an increase of 81% growth in number of accounts and 143% in amount in this cohort! The average balance in the accounts has grown handsomely by 38.7%, to ₹4.6 lakh cr from earlier ₹3.3 lakh cr."

"So, the total interest earned by Sr citizen works out to ₹2.7 lakh crore; ₹0.13 lakh crore from SCSS and ~₹2.57 lakh crore from Sr citizen’s bank deposits," the report says, adding that by assuming 10% (average) tax paid by the senior citizen harmonised across cohorts, the tax mop-up by GoI would come around ₹27,106 crore. The government has also raised the threshold of TDS on deposits for senior citizens to ₹50,000 now, possibly working as an additional fillip for deposit mobilization for senior citizens.

Separately, Atal Pension Yojana, a universal social security scheme initiated by GoI in 2015, along with PMSBY/PMJJBY and targeting the fringe and vulnerable groups mostly, presently has 5.46 crore subscribers, with an AUM of ₹34,781 crore (Feb’24). The subscribers are slated to receive the fixed maximum pension of ₹5,000 per month (ranging from ₹1,000 to ₹5,000), at the age of 60 years, depending on their contributions, which itself would be based on the age of joining the scheme.

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