Decoded: How much Indians save in Fixed Deposits

Fixed deposits are considered one of the safest investment options in India. They are regulated and monitored by the Reserve Bank of India (RBI) and offered by banks and non-banking financial institutions across India. FDs have, for decades, been a trusted choice of risk averse investors and senior citizens as a secure avenue to grow savings.

In the past, FDs lost their appeal to some extent due to falling interest rates, which led to increased investments in instruments yielding higher interest, such as mutual funds and certain government-backed schemes.

The economic uncertainty that followed the pandemic has led Indian investors to seek safer investment avenues which allow them to calculate the exact returns. This is among the primary reasons why FDs, offering a fixed rate of interest for a pre-set period, are appealing to risk-averse individuals. Rate hikes have added to the popularity that FDs enjoy. However, in case of interest rate drops, investors tend to shift their investments to other higher income generating products.

Add WION as a Preferred Source

Investors with a low-risk appetite often view mutual funds and stocks as high-risk investments. Stocks, on the other hand, require one to gain a fair understanding of the investment before investing. Thus, investors in search of hassle-free options, tend to turn to FDs which are not subject to market fluctuations, thus ensuring a fixed rate of interest on deposits.

People across India rely on fixed deposits for several reasons – assured returns, safety of capital, easy liquidity, to name a few. Retired individuals prefer fixed deposits for their periodic fixed interest pay out. It ensures a stable income stream during retirement.

A look at recent RBI data gives us a glimpse of the how India invests in fixed deposits.

Today, the average bank FD is just over Rs.42,500. The average deposit amounts in Delhi and Maharashtra are much higher compared to other states in the country. The average deposit amount in Delhi hovers around Rs.80,000, followed by Maharashtra where the average deposit is hovers above Rs.73,000. States in the south of India weigh heavily on both volumes and averages, while states in the north-east like Mizoram and Sikkim are punching above their weight in terms of averages.

According to the data, Delhi accounts for around 10% of all deposits by volume in India and Maharashtra accounts for another 25%. Analysis of the investment preference data of an average BankBazaar customer revealed that FDs are the second most preferred investment, with the first being mutual funds. However, with interest rates having risen, we expect to see a greater preference for FDs in our upcoming market research.

Investing in FDs is flexible and convenient for Indians. Most banks and financial institutions with online platforms have made it easy for investors to open and manage their FD accounts. RBI data indicates that over 103 trillion is currently locked in 24.23 million FDs. This figure surpasses the 18.5 trillion held in current accounts and 59.70 trillion in savings accounts, which, put together, comes to a whopping 181 trillion. For comparison, the Indian GDP in 2021-22 was estimated to be 234 trillion.

Offering guaranteed returns and capital protection, FDs are a popular investment which has only gained popularity following the interest rate hikes. For investors averse to risk, FDs make for an ideal investment that provides easy liquidity, especially in times of emergencies. However, investors seeking higher returns might look to other, more suitable options to achieve their financial goals.

Adhil Shetty is the CEO ofBankbazaar.com