బ్యాంకింగ్ సంక్షోభం, డిపాజిట్లు వేగంగా పెరగడం లేదు || Banking crisis, Deposits not growing faster ||

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బ్యాంకింగ్ సంక్షోభం, డిపాజిట్లు వేగంగా పెరగడం లేదు || Banking crisis, Deposits not growing faster ||
Fix fixed deposits
Deposits not keeping up with loans is a problem that needs a rethink on tax front
Nirmala Sitharaman’s call to state-run banks to step up deposit mobilisation puts the spotlight on an issue RBI has flagged in recent weeks. Growth in deposits has been lagging loan growth over successive quarters, clocking 10.6% year-on-year in July-end compared to 13.7% for loans. This poses a systemic risk, as banks are forced to rely on higher-cost market borrowings and other instruments to raise funds. That we have a problem at hand is also confirmed by a report that found bank deposits losing their appeal among younger people. Given the low post-tax returns from deposits, the young are increasingly preferring riskier assets like mutual funds and equities. In fact, nearly 47% of term deposits are now held by senior citizens.
Tax a dampener | Some of this is understandable given the growing shift from savings to investment in India. But part of the problem lies with govt and banks not doing enough to make deposits attractive to bank customers. The same study found that taxation has a net impact of 7% on bank deposits. The chairman of SBI, country’s largest bank, have stressed the need to offer tax relief on income from deposits. So, it would be best if bank deposits were treated as a separate asset class and offered tax waiver. Considering the vital role they play in mobilisation of funds for the system, wouldn’t it more than offset revenue loss for govt? As things stand, deposits do not even enjoy tax parity with other asset classes. For instance, while other asset classes are taxed on redemption, deposit income is taxed on accrual basis.
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