The Union Budget’s missed opportunity: Fixing fixed deposits

Yesterday, as Finance Minister Nirmala Sitharaman’s Union Budget speech drew to a close, her announcements about the abolition of angel tax and the removal of the indexation benefit for property sales stole headlines. For many in the banking space, however, what wasn’t mentioned in the Budget was as conspicuous as what was—specifically, the humble fixed deposit (FD).

For decades, FDs have been a mainstay of the investment strategies of most Indians, embodying the country's affinity for stability and guaranteed returns. The simplicity of FDs coupled with the comforting promise of an assured interest payout has long overshadowed the allure of other financial instruments.

According to the Reserve Bank of India's July 2024 Bulletin, FDs remain the preferred choice for most investors. The fine print, however, reveals a concerning development for the health of the overall banking sector—the total proportion of monies going to FDs in comparison to other financial instruments is shrinking.