There should be a level playing field in terms of tax treatment between bank deposits and other financial instruments, according to SBI Chairman CS Setty.
His comments come in the backdrop of bank deposit growth lagging credit growth. Banks overcoming this mismatch by raising resources through short-term certificate of deposit (CD) issuances, participating in open market operation (OMO) purchase auction of Government Securities, among others.
“But there are fiscal constraints in that (providing favourable tax treatment)…and globally also we have not seen anywhere where bank deposits are given any special treatment.
“But at the same time equity instruments are also not given a special treatment in many jurisdictions. So, in an evolving equity environment, probably those benefits were justified,” he said on the sidelines of the launch of SBI’s CHAKRA’ – Centre of Excellence (CoE) for financing sunrise sectors.
As on January 26, 2026, the year-on-year (y-o-y) deposit growth of all scheduled banks at 10.61 per cent was 237 basis points lower than credit growth of 12.98 per cent. A level playing field in tax treatment could help Banks’ mobilise deposits.
According to the latest Economic Survey, the composition of household financial savings in India has undergone a significant shift over the past decade, indicating a deeper reconfiguration in how households allocate incremental financial resources.
This transition has been marked by a gradual but persistent movement towards market-linked instruments, particularly equities, reflecting both structural changes in the financial system and evolving household risk preferences.
“The share of equity and mutual funds in annual household financial savings increased from ~2 per cent in FY12 to over 15.2 per cent in FY25. This shift has coincided with a steady rise in SIP contributions…The growing prevalence of systematic investments reflects a shift towards long-term and sustained household engagement with savings being channelled in a disciplined manner across market cycles,” the Survey said.
In contrast, the share of deposits declined from over 58 per cent in FY12 to around 35 per cent in FY25, after having fallen to as low as 31.9 per cent in FY22.
The Survey observed that this pattern suggests portfolio diversification rather than displacement, with households adding equity exposure to their existing savings rather than substituting entirely away from traditional instruments.
Meanwhile, to ensure that financing for India Inc out of the Gujarat International Finance Tec-City — International Financial Services Centre (GIFT IFSC) continues to be attractive, the upcoming Union Budget may have a proposal extending the current tax holiday on income earned by any entity from IFSC, said a senior SBI official.
Currently, Income Tax holiday for entities in the IFSC is available for 10 consecutive years out of 15 years. Some bank’s such as SBI, which opened its IFSC Banking Unit in 2016, will lose the benefit of tax holiday in 2026.
Published on January 31, 2026
