Demand deposits - savings and current deposits - with Indian banks jumped for the first time in five years in the first quarter of current fiscal, the latest stats released by the Reserve Bank of India (RBI) show.
According to the recently released stats, demand deposits jumped 8 per cent, from Rs. 6,00,000 crore in the quarter the end of April this year to Rs. 6,50,000 crore in the quarter through June 30.
The increase is impressive, particularly when we consider a decline of 2 per cent to 6 per cent in Demand deposits in the corresponding period of previous fiscal.
VR Iyer, executive director of RBI, said that more investors put money in savings and current deposits as these deposits provide safety for their investments.
C Jayaram, joint managing director at Kotak Mahindra Bank, attributed the increase to the blend of safety and hike in interest rate. Speaking on the topic, he said, "In addition to safety, hike in interest rate on saving bank deposit has made them comparatively attractive."
The central bank of India had hiked the savings bank deposit interest rates from 3.5 per cent to 4 per cent in May last year. In October 2011, the central bank had deregulated the interest rate, after which many banks like Kotak Mahindra Bank and Yes Bank increased interest rate on saving deposits to 7 per cent to attract more and more depositors.