In times of slowdown, Indian savings deposits double in 5 yrs
EXPANDING BASE
MUMBAI: Indians seem to prefer traditional bank savings more compared to other avenues of parking money in times of economic uncertainty.
At the time when the economy is struggling to recover from decade-low growth, a depreciating rupee and record high current account deficit (the difference between dollar inflows and outflows), savings deposits with commercial banks have surged— growing by 14% a year over the past five years. Aggressive expansion of bank brances also seems to have added to the uptrend.
Bank deposits in savings accounts almost doubled in the last five years, rising 94% to ₹17 lakh crore at the end of March 2013 from ₹9 lakh crore at the end of March 2009 according to Reserve Bank of India (RBI) data.
“More people have now come under banking due to rapid expansion of branch network in rural and semi-urban areas, allowing individuals to open savings accounts,” said RK Bansal, executive director, IDBI Bank.
The government has been pushing banks to open more branches in rural and semi-urban areas under its financial inclusion plan. As a result banks increased branches to 105,753 at the end of March 2013 from 80,217 at the end of March 2009, a growth of 32%.
The RBI’S decision to increase interest rate on savings bank deposits to 4% in 2011 from 3.5% earlier has also helped banks to grow deposits.
“Increase in savings deposit rates by 0.5 percentage points to 4% has also motivated individuals to keep more amount in saving deposits,” said a retail banking head of a private bank.
However, in case of long-term investment options, experts said investors should look at equities rather than bank deposits.
“Data over longer periods show that equity returns outperform deposits over most five and 10-year periods, and also beat inflation,” said Vishal Dhawan, founder, Plan Ahead Wealth Advisors.