Why Indians Are Shifting Savings Into Fixed Deposits: RBI Data Reveals Trend

New Delhi: A growing number of Indians are moving their money from savings accounts to fixed deposits (FDs), according to the latest RBI data. In the September 2025 quarter, FDs accounted for 62% of total bank deposits, the highest level in two years. In comparison, their share was 57% in March 2023. Meanwhile, the share of savings deposits fell from 33% to 29% over the same period.

Why the Shift?
The main reason is the higher interest returns offered by FDs. With expectations that the RBI may cut interest rates in the near future, customers are locking in higher FD rates before potential reductions.

Customer Behavior
According to Virat Diwanji, Head of Consumer Banking at Federal Bank, there has been a significant surge in term deposits during the June and September quarters of 2025. Customers are now highly rate-conscious, aided by digital banking tools that make it easy to compare returns.

Underlying Factors
In 2024 and early 2025, banks faced liquidity shortages, prompting them to raise FD interest rates to attract deposits. Sali Nair, MD & CEO of TMB, explained that the desire for higher returns pushed customers away from savings accounts towards FDs. Rising loan demand and a booming stock market/SIP investments also diverted funds from savings accounts, contributing to the decline.

Impact on Banks
While banks pay low interest (2–3%) on savings accounts, FD rates can go up to 7–8%, affecting profitability. Despite the RBI cutting rates by 1% since February 2025, competitive pressure has kept FD rates relatively high. Banks remain cautious about reducing FD rates, needing deposits to meet loan demand and maintain adequate liquidity.

Key Figures

• 62% – FD share of total bank deposits (Sept 2025)
• 57% – FD share (March 2023)
• 29% – Savings account share (Sept 2025)
• 33% – Savings account share (March 2023)
• 36% – Private banks’ FD share (up from 33% in June 2023)
• 58% – Public sector banks’ FD share (down from 61%)

Bottom Line
As interest rates remain attractive on FDs, customers are increasingly prioritizing guaranteed returns over liquidity, signaling a major shift in how Indians are managing their bank deposits.