The recent SBI Research report sheds light on a pronounced shift in investment preferences between senior citizens and younger investors. According to the report, nearly 47% of fixed deposits (FDs) are now held by senior citizens, highlighting their ongoing preference for these traditional, low-risk investments despite a trend of declining post-tax returns. This steadfast inclination towards FDs among older individuals contrasts sharply with the investment behaviors of younger generations.
In stark contrast, younger investors are increasingly leaning towards more volatile but potentially lucrative asset classes such as mutual funds and equities. This demographic shift reflects a broader trend where younger investors are actively seeking higher returns by embracing riskier investment options. The growing appeal of these assets is supported by the substantial increase in mutual fund investor accounts, which have expanded nearly fivefold over the past decade—from fewer than 4 crore accounts in March 2014 to over 19 crore accounts by June 2024.
The report also notes a significant demographic shift in capital market investors, with the median age now standing at 32 years. Approximately 40% of these investors are under 30, underscoring the rising engagement of younger individuals in capital markets. This generational divide in investment behavior is indicative of changing financial priorities and a greater appetite for higher returns among younger investors.
In light of these developments, SBI economists have proposed revising the tax treatment on bank deposits to enhance their attractiveness. They suggest implementing a taxation model where deposits are taxed at the time of withdrawal rather than during accumulation. This proposed change aims to address the current system's perceived suppression of deposit growth, which has been estimated at around 7%.
In response to these evolving investment trends, Finance Minister Nirmala Sitharaman has called upon public sector banks to intensify their deposit mobilization efforts. She has emphasized the need for targeted campaigns, particularly in rural and semi-urban regions, to bolster deposit collections and keep pace with the growing demand for loans. Additionally, Sitharaman has highlighted the importance of enhancing customer relationships and fortifying cybersecurity measures to safeguard against increasing threats, ensuring a more secure and robust banking environment.
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