The Banking System In The Country Has Roughly Rs 102 Lakh Crore In Retail Deposits.

Ordinary investors who keep their savings in banks are getting negative returns. This means that these retail depositors are not making a profit from bank deposits but making a loss. SBI economists say that in such a scenario, the tax on interest income should be reviewed.

In a report prepared by SBI chief economist Soumya Kanti Ghosh, the economists said, "If it is not possible to review the tax on interest income of all depositors, at least senior citizens should be given relief." This is because older people rely heavily on income from bank deposits for their daily needs. According to these economists, the country's banking system has about Rs 102 lakh in retail deposits.

Under the current system, if the interest income is more than Rs 40,000, the banks deduct 10% TDS (deducted at source) while depositing the amount. In the case of senior citizens, the limit is Rs 50,000. The problem is that government policy has been focused on economic development for several years. This has led to lower loan rates and lower deposit rates, significantly reducing depositors' income.

This is how to get a negative return.

Interest on FDs from one week to 10 years is 2.50% to 5.75%. Senior citizens also get 2.50% to 6.50% interest. The average interest on FDs is 5%. In comparison, last month's inflation rate was 5.3 percent in retail prices, the lowest level in four months. Inflation was 6.69% in August 2020. This means that inflation is rising more than the ordinary people's average interest income. That is, adequate income from interest is becoming negative.

Increasing pressure on banks' margins

The report also said there is much pressure on banks' margins as there is more liquidity in the system. As a result, banks are offering retail loans at less than 7% interest. In such a situation, there is no scope for them to increase the rate of FD.