This suggestion was made by the banks during a recent meeting with key officials of the Finance Ministry. Banks are advocating deposit incentives due to growing concerns about the rising credit-deposit ratio.
“It (the suggestion) is being reviewed, and may provide some relief to banks that have sought incentives to raise deposits,” Dheeraj Tiwari's ET report quoted a government official as saying. A final decision on the proposal will be taken closer to the budget announcement.
Expectations from Budget 2024
Under the old tax regime, interest income up to Rs 10,000 per year from savings accounts was tax-free. Section 80TTA of Income Tax ActFor senior citizens aged 60 years and above, this limit has been fixed at Rs 50,000 and includes interest income from fixed deposits under Section 80TTB. However, these benefits were removed under the new tax regime when it was introduced in the 2020 Budget.
“Both the issues of increasing the old limit as well as allowing interest income earned from savings accounts with scheduled commercial banks (SCBs) under existing rules in the new regime are being discussed,” the person said, adding that banks have already made a presentation on the matter.
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The Reserve Bank of India (RBI) in its latest Financial Stability Report found that households are diversifying their financial savings and investing more in non-banking and capital markets.
The report highlights that this widening gap is reflected in the rising credit-deposit (CD) ratio, which had reached a high of 78.8% in December 2023, and declined to 76.8% at the end of March.
Recently, the country's largest private sector lender HDFC Bank reported a 5% sequential decline in its current account-savings account (CASA) deposits to Rs 8.63 lakh crore during the first quarter of the current fiscal year.