According to the RBI’s quarterly data for June 2026, households held 58.8 per cent of all bank deposits and accounted for 98.9 per cent of fresh deposits. Term deposits grew 12.9 per cent, ahead of savings deposits at 10.6 per cent and current deposits at 5.3 per cent. RBI’s annual data shows the share of savings deposits falling from 34.6 per cent in March 2022 to 28.7 per cent in March 2026. This suggests that households and other depositors have been moving a portion of idle balances into term deposits, including fixed deposits, where returns are generally higher and more predictable.
Overall market reports point out that FDs are still one of the most trusted investment options for Indian households, and are particularly favoured by people who want safety.
“For many Indian families, senior citizens and retired people, an FD is not merely an investment; it is a way to protect money saved over many years and earn a regular income from it,” Dinkar Sharma, company secretary and partner, Jotwani Associates, told THE WEEK. “However, nowadays, the investment preferences of Indians are changing. People are increasingly exploring alternatives to FDs, such as mutual funds in the hope of better returns. The attraction of FDs has also been affected by the fact that the interest earned (after tax) generally does not keep pace with inflation.”
Added Harsimran Sandhu, professor and area chairperson, finance, Institute of Management Technology, Ghaziabad: “RBI data indicates strong mobilisation of bank deposits into term deposits. However, they do not establish that a majority of Indian investors prefer FDs, because bank-deposit statistics do not capture the full range of household investments.”
On October 1, the central bank brought in a new rule for FDs, under which banks have to offer uniform interest rates for similar deposits accepted on the same day, irrespective of the branch. Also, rates on bulk deposits must be published on the bank’s website by 10:10 am every business day. The RBI has not ordered any bank to raise or cut retail FD rates, and existing deposits continue at their contracted rates. The changes follow a draft the RBI released on June 5.
Will such a move help boost fixed deposits?
“The rule alone is unlikely to do so. The rule makes pricing consistent but does not make it higher. The rate cycle may matter more,” said Thomas Stephen, director and head, preferred, Anand Rathi Shares and Stock Brokers. “On October 7, RBI raised the repo rate by 25 basis points to 5.50 per cent. The increase may create conditions for higher deposit rates, but banks are not required to pass it on to FD customers. The actual response will depend on deposit competition, credit demand and each bank’s liquidity position. Banks do have a reason to compete for deposits. RBI’s September bulletin shows the credit-deposit ratio of scheduled commercial banks rising from 68.6 per cent in September 2021 to 82.2 per cent in March 2026. As of June 2026, bank credit was growing at 16.5 per cent against deposit growth of 11.5 per cent, as reported from RBI data.”
As per present conditions, the starting point is modest. As of September 16, SBI’s highest FD rate was 6.45 per cent and HDFC Bank’s was 6.50 per cent. RBI’s June data shows that more than two-thirds of term deposits now carry a rate below 7 per cent, compared with 35 per cent of term deposits a year earlier. At a 30 per cent marginal tax rate, a 6.5 per cent FD delivers roughly 4.55 per cent after tax, before cess and surcharge. That is below the RBI’s reported FY2027 inflation projection of around 5 per cent, implying a potentially negative real post-tax return. Although bank FDs offer high capital certainty, they are not entirely risk-free in real-return terms.
“Growth has been steady rather than muted, but it is not keeping pace with lending,” said Stephen. “Scheduled commercial bank deposits grew 11.5 per cent in the year to June 2026, against 11.3 per cent a year earlier and 11.6 per cent a quarter earlier. Private banks grew faster at 13.8 per cent, compared with public sector banks at 10.3 per cent. Large deposits make up a big share of the base: deposits of Rs1 crore and above made up 47.3 per cent of all term deposits in June 2026. The data also shows that large deposits account for a substantial part of the term-deposit base, so the headline growth rate should not be read as a uniform increase across all retail savers.”
People continue to put substantial amounts of money into fixed-term deposits, but growth in the total amount invested in FDs does not mean that FDs are becoming more popular.
“The share of bank deposits in annual household financial savings has declined over the longer term, while the share of equity and mutual funds has increased. Though FDs continue to grow in absolute terms, they are facing increasing competition for the additional savings that people generate. Investors are no longer looking only at the safety of their money but are also comparing the returns they could earn elsewhere,” said Sharma.
Alternatives to FDs include mutual funds, direct equities, government securities, small-savings schemes, bonds, gold and real estate. The suitability of each option depends on the investor’s goals, time horizon, liquidity needs, tax position and ability to bear risk. “Mutual funds and equities might help investors pursue long-term wealth creation, but returns are market-linked and not guaranteed. Bonds and government securities also differ from bank FDs in terms of liquidity, interest-rate risk, credit risk and taxation,” said Sandhu. “An FD is generally used for predictable contractual returns, subject to the bank’s terms and applicable deposit-protection rules; market-linked products involve different risks and return profiles.”
