Senior citizens are proving to be a great source of stable deposits for the banking system. The attraction of 50 basis points additional interest rate and higher deposit insurance cover ensures that the golden-agers don’t leave the safety of bank deposits for lucrative returns offered by non-convertible debentures issued by companies.
This is underscored by the fact that the number of senior citizen term deposits accounts in the country, per State Bank of India’s economic research department’s (ERD) estimates, jumped about 81 per cent to close to 7.4 crore as of December-end 2023 from around 4.1 crore in 2018.
Simultaneously, senior citizens’ aggregate deposits shot up about 150 per cent to ₹34.367 lakh crore as of December-end 2023 from ₹13.724 lakh crore in 2018.
The average amount per senior citizen term deposit account increased about 39 per cent to ₹4,63,472 as at December-end 2023 from ₹3,34,243 in 2018, per ERD data. Banks’ deposit insurance cover was increased from ₹1 lakh to ₹5 lakh with effect from February 4, 2020.
“The increase in deposit rates, the higher interest rate differential for senior citizens and the special deposit schemes for senior citizens (for example WE-CARE by SBI) have all propelled a tectonic shift in deposits accretion for senior citizens, ably supported also by Government initiatives on Senior Citizen Savings Scheme (SCSS), Mahila Samman Savings Certificate and so on.
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“.... In fact, the share of senior citizen term deposits (by number of accounts) increased to 30 per cent now from 15 per cent earlier in term deposits kitty!,” said Soumya Kanti Ghosh, Group Chief Economic Adviser, SBI, said in a report.
Out of the 7.4 crore senior citizens’ term deposit accounts, almost 7.3 crore accounts are of the size of up to ₹15 lakh, per the ERD’s estimates. By assuming 7.5 per cent interest on these deposits, ₹2.6 lakh crore interest has been earned by senior citizens.
In recognition of the challenges faced by senior citizens -- medical and other care needs growing exponentially as nuclearization of families gains velocity, the Government has ensured superior interest offerings through specialized schemes like SCSS (8.2 per cent rate of interest/RoI with outstanding of ₹1.62 lakh crore) as also card rates of banks having 50-75 bps markup for this segment, per the SBI report.
So, the total interest earned by senior citizens works out to ₹2.7 lakh crore -- ₹13,000 crore from SCSS and about ₹2.57 lakh crore from senior citizens’ bank term deposits.
Ghosh assessed that by assuming a 10 per cent (average) tax paid by the senior citizens harmonized across cohorts, the tax mop-up by the Government would come to around ₹27,106 crore.
He emphasised that the Government has also raised the threshold of TDS (tax deducted at source) on deposits for senior citizens to ₹50,000 now, possibly working as an additional fillip for deposit mobilization for senior citizens.