Post office saving schemes compete with bank FDs after 3 rate hikes by govt

Post office term deposits, which were fetching lesser returns than bank FDs in the recent past, have again become competitive with the government effecting three back-to-back increases in interest rates on small savings schemes.

The return on post office term deposits of two years under the small savings schemes is 6.9 per cent, the same as offered by most banks on deposits of similar maturity.

After a series of repo rate hikes by the RBI since May 2022, the transmission to retail deposit rates gathered pace in the second half (H2) of the last fiscal after remaining subdued in April-September (H1) period as banks intensified their efforts to garner retail deposits to fund robust credit growth, a central bank analysis.

The Weighted Average Domestic Term Deposit Rate ( WADTDR) on fresh deposits (including retail and bulk) of banks increased by 222 basis points (bps) from May 2022 to February 2023.

During H1, banks had focussed on mobilising bulk deposits. This was reversed in H2 wit