The report points out that debt funds are clearly not substitutes for bank deposits, but equity and other funds are gaining favour progressively. RBI’s recent report on financial assets of households shows that there has been a shift in the pattern where mutual funds and equity witnessed a sharp increase in FY22 with shares of 6.3 per cent and 1.9 per cent in overall financial assets respectively (the ratio was 2.6 per cent and 1.1 per cent in FY20), while the share of bank deposits declined to 25.5 per cent in FY22 from 34.4 per cent in FY20. According to a research report by Bank of Baroda, with a changing financial landscape, volatility in the interest rate regime and increasing risk-taking appetite, there tends to be a change in the pattern of deployment of financial savings. Though FD rates have risen recently it has always been a matter of debate on whether bank deposits are still the preferred choice of instrument for financial savings. RBI will hold an additional Monetary Policy Committee meeting on November 3. Take, for instance, for this fiscal so far (April-June), the credit-deposit ratio is at 73.5 per cent, compared to 70.5 per cent a year ago.
Rates are, however, expected to go up further due to the widening credit-deposit growth gap, especially since the rate hike does not seem to have impacted the credit off-take. How banks are offering FD rates/Design: Pragati Srivastava
