New Delhi: Post office term deposits, which were fetching lower returns than bank FDs in the recent past, have become competitive again as the government made three back-to-back hikes in interest rates on small savings schemes. The two-year return on post office term deposits under small savings schemes is 6.9 per cent, which is higher than that offered by most banks on similar maturity deposits.
Following a series of repo rate hikes by the RBI from May 2022, transmission to retail deposit rates accelerated in the second half (H2) of the last financial year after remaining subdued in the April-September (H1) period as banks stepped up their efforts Speeded up Mobilizing Retail Deposits for Stronger Credit Growth, A Central Bank Analysis. ,Also read: FD interest rates for senior citizens 2023: These banks are offering over 9%,
The weighted average domestic term deposit rate (WADTDR) on fresh deposits (including retail and wholesale) of banks increased by 222 basis points (bps) from May 2022 to February 2023.Also Read: 10 Best Government Savings Schemes: Which One Should You Choose? Check Profit Calculator,
During the first half, banks focused on bulk deposit mobilization. This was reversed in H2, with fresh retail deposit rates (122 bps) rising more than fresh wholesale deposit rates (77 bps), RBI said.
RBI said the transmission to WADTDR on outstanding deposits is gradually increasing, reflecting the longer maturity profile of fixed deposits contracted at fixed rates.
With respect to Small Savings Instruments (SSI), the government has cut interest rates by 10-30 bps for the October-December quarter of 2022-23, 20-110 bps for the January-March quarter of 2022-23 and 10-70 bps for the has increased. BPS for the first quarter of the current financial year.
The interest rates on SSI had remained unchanged for nine consecutive quarters – from Q2 of 2020-21 to Q2 of 2022-23. RBI said that with these adjustments, the rates on most SSIs are closely aligned with the formula-based rates.
Interest rates on SSI, which are administered by the government, are linked to secondary market yields on G-Secs of comparable maturity.