MUMBAI: The government has made a windfall of Rs 27,106 crore in taxes from senior citizens in the just-concluded fiscal when deposits by them doubled in terms of account numbers and the money parked in such accounts jumped to Rs 34 trillion as fund-starved banks have been chasing deposits with higher pricing, shows an analysis.
According to a tabulation of the numbers by Soumyakanti Ghosh, the chief economic advisor at the nation’s largest lender State Bank, there could now be close to 74 million senior citizens’ term deposits accounts, with aggregate deposits of Rs 34 trillion. In fact, the share of senior citizens’ term deposits by the number of accounts doubled to 30 percent now from 15 percent in FY19 when there were around 41 million senior citizens term deposits accounts with total deposit of Rs 14 trillion.
This means that in the short span of five years, the growth has been 81 percent in the number of accounts and 143 percent in the amount in those accounts. The average balance in the accounts has grown handsomely by 38.7 percent to Rs 4.6 trillion from the earlier Rs 3.3 trillion.
“Of these 74 million accounts, almost 73 million accounts should be in the size bracket of up to Rs 15 lakh. By assuming interest on senior citizen bank deposits being an average of 7.5 percent, the interest earned would stand at Rs 2.7 trillion during the year. And assuming 10 percent average tax paid by the senior citizens across cohorts, the tax mop-up by the government would come in around Rs 27,106 crore,” Ghosh said.
On the other hand, these 74 million senior citizens have earned Rs 2.7 trillion in interest from their Rs 34 trillion deposits in FY24. Of this, Rs 13,000 crore came from senior citizens’ savings scheme, and Rs 2.57 trillion from senior citizen’s bank deposits.
It may be noted that the government has raised the threshold of TDS (tax deducted at source) on deposits by senior citizens to Rs 50,000 now, which has worked as an additional fillip for deposit mobilization from senior citizens.
Systemwide bank credit growth jumped 20.2 percent in FY24 adding net of addition of Rs 27.6 trillion. Credit growth was only 15 percent in FY23 and 8.6 percent in FY22, according to the analysis.
On the other hand, deposit accretion picked up in the later part of the fiscal clipping at 13.5 percent or net adding Rs 24.3 trillion, which is much better than the 9.6 percent in FY23 and 8.9 percent in FY22.
As credit growth far outpaces deposit growth, banks have been on an aggressive pitch to woo deposits and have raised deposits rates in the second half the year, even though the Reserve Bank has been holding the rate since February 2023.
Banks have increased the weighted average domestic term deposit rates on outstanding deposits by 96 bps during the year and the same on fresh deposits by 22 bps, while across banking groups, the pass-through to the weighted average domestic term deposit rates on fresh and outstanding deposit rates has been higher for public sector banks than their private sector peers. This has had the incremental share of term deposits increasing to an estimated 93 percent while that of the low cost Casa share declining to 7 percent in FY24.
The increase in deposit rates, the higher interest rate differential for senior citizens and the special deposit schemes for senior citizens such as the We-Care offer by SBI have propelled a major shift in deposits accretion for senior citizens.