Middle classes form the bulk of depositors in the banks. It is these deposits that in turn form the bulk of the working capital that allows banks to operate. This year’s Economic Survey, in fact, rejoices in the double-digit growth in bank deposits. And yet, middle-class depositors have been shortchanged over the years by the dwindling interest rates on their savings bank deposits. “The interest on savings bank accounts, which was 5% in 1977, was brought down to 3.5% in 2003, and now it has come down to 2-2.5%,” says Thomas Franco, former general secretary of the All India Bank Officers Confederation. “If the middle classes were paid their fair share of interest at say 5%, they would have earned near about Rs 1.8 lakh crore more last year.” https://thewire.in/economy/the-banking-sector-reveals-the-middle-classes-arent-really-getting-a-bonanza
This is far more than the Rs 1 lakh crore that the finance minister claims to have “foregone” with the tax rebate she bragged about. Fixed deposits account for nearly 60% of all bank deposits, and as per the Economic Survey, its share in bank deposits is growing. If one takes into account that the interest rates on FDs have nearly halved over the last two decades, the actual earnings foregone by the middle classes are massive. And yet, there seems to be a general acceptance of this as fait accompli.
The real story behind disappearing NPAs
The banks have written off a whopping Rs 16.5 lakh crore in bad loans over the last decade. In fact, Rs 1.69 lakh crore has been written off in 2024 alone! It is the public sector banks (PSBs) that have taken the major share of these write-offs and it is the corporates who account for the major share of these bad loans or NPAs.
the middle classes – the rates tell the same story of disparity. When it comes to loans, one observes that the low interest ones (under 8%) are more accessible to the corporates (17.2%) than the household sector (4.4%). Meanwhile, loans with interest rates above 11% are disproportionately high among the household sector (29.4%) while much lower for the corporate sector (8.8%). So, despite contributing the bulk of the bank’s deposits, the middle classes are deprived of their deposit rates and low-interest loans, apart from the severe understaffing of the banks which also serves to hurt their interests.
So, while a one-time tax bonanza in this year’s Budget becomes an eyewash that suits political interests, the systematic loot of the common person and the middle classes through such raw deals rarely make headlines. After all, who is interested in the detail, when the devils run the show?
by Anirban Bhattacharya and Pranay Raj
07/02/2025