Banks seek reduction in lock-in period for tax-saving FDs to 3 years

As the finance minister P Chidambaram calls banks to present their wish-lists for Union Budget 2013-14, certain lenders have called for reduction in lock-in period for tax-saving fixed deposits (FDs) to three years from five years to boost the deposit growth as well as bring their schemes on parity with mutual funds' equity-linked saving schemes (ELSS).

"It will help us bring the tax-saving bank FDs in parity with mutual funds' tax savings schemes. We want it (lock-in period) reduced to three years. It will also help us attract more deposits," said M Narendra, chairman and managing director of Indian Overseas Bank.

Another banking analyst said that NBFCs have now been acting as intermediaries between banks and depositors due to the tax arbitrage opportunity available to depositors.

The demand came at a time when Indian banks have been struggling to shore up deposits as they grew 13.35 per cent year-on-year in the fortnight ended December 14 to Rs 64.33 lakh crore as against the RBI's projection of 15 per cent for the current fiscal.

Read more about: fds
Story first published: Wednesday, January 9, 2013, 14:30 [IST]
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