Banking: Are people no longer willing to deposit money in banks? RBI report reveals a major revelation..

Bank Deposits: Bank deposits have always been considered the safest investment in India. By depositing their hard-earned money in banks, people not only gain security but also earn basic interest. But a new RBI report has raised a significant question—are people now holding back on bank deposits? Are deposits in the banking system not growing as rapidly as before? The RBI's Quarterly Basic Statistical Return-2 (BSR-2) on Deposits – September 2025 report has revealed several interesting and surprising facts.

This report clearly states that bank deposit growth in India has reached a seven-quarter low, which could signal a major shift in the country's savings habits and investment patterns.

Why the 7-quarter low of deposit growth?

According to the RBI, deposits in scheduled commercial banks grew by only 9.9% in the July-September 2025 quarter, compared to 11.7% in the same period last year. This decline suggests that people are not depositing money into their bank accounts as rapidly as they once did.

There could be several reasons behind this, such as growing interest in mutual funds, continued record highs in the stock market, digital gold, higher interest rates on small savings schemes, and increased spending amid rising inflation.

Deposits Slowest in Metro Cities
Metro cities, home to India's highest-income groups, experienced the slowest growth in deposits. According to the RBI report, deposit growth in metro branches was only 9.6%, compared to 12.7% last year. This means that people in larger cities are depositing less money in banks. This is also interesting because metro branches hold the largest share of deposits.

Rural India outperforms cities.
The report clearly highlights the strength of rural and semi-urban areas. Deposit growth on an annual basis was as follows:

⦁ Rural areas: 11.7%
⦁ Semi-urban areas: 10.7%
⦁ Urban areas: 9.5%
⦁ Metros: 9.6%

This means that more money is coming into banks from smaller areas. This shows that rural savings remain strong, and people there continue to rely on traditional banking.

Decline in Private Banks
An important aspect of the report is the strengthening of public sector banks' hold on total deposits. The share of public sector banks increased to 57.6%, compared to 57.3% in the previous quarter. Deposit growth for private banks fell sharply to just 10%, compared to 15.1% last year.

This is not the first time that deposit growth at private banks has slowed. Many financial experts believe that the increasing stability and trust in public sector banks have drawn people back to PSU banks.

More low-interest deposit accounts opened.
Another interesting point is that term deposits (FDs) grew by 11.6%. However, savings accounts grew by only 6.7% and current accounts by 9.3%. This means that people are opening fixed deposits, but not investing large amounts in daily-use accounts.

However, another aspect of FDs is puzzling: 46% of term deposits are in accounts with interest rates below 7%, compared to only 31.2% last year. This means that people are investing in FDs despite the low interest rates—perhaps because they consider them safer than other options.

Which tenure are people investing in more FDs?
RBI data shows that 69.8% of FDs are in the one- to three-year tenure range, while 20% are for less than one year. This suggests that people are increasingly prioritizing short- and medium-term, safe investments. Long-term FDs are no longer as popular.

High-income investors continue to have confidence in FDs.
Another surprising finding is that FDs of ₹1 crore and above have grown by 12.3%, indicating that high-net-worth investors continue to have confidence in bank FDs.

Are people stopping from depositing money in banks?
The data does not indicate that people are moving away from banks. Rather, it indicates that deposit growth has slowed. Savings are declining in metro cities, and people are prioritizing FDs. Private banks have weakened slightly. The shift toward safer investments is increasing.

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