By continuing, you agree to LoansJagat's Credit Report Terms of Use, Terms and Conditions, Privacy Policy, and authorize contact via Call, SMS, Email, or WhatsApp
Disclaimer: The information published on LoansJagat is intended for general informational and educational purposes only and should not be considered financial, legal, or investment advice. Interest rates, loan terms, statistics, and other data may change over time and may vary by lender or source. Please verify the latest information and consult a qualified financial advisor or the respective Bank/NBFC before making any financial decisions.
Subscribe Now
About the author
LoansJagat Team
‘Simplify Finance for Everyone.’ This is the common goal of our team, as we try to explain any topic with relatable examples. From personal to business finance, managing EMIs to becoming debt-free, we do extensive research on each and every parameter, so you don’t have to. Scroll up and have a look at what 15+ years of experience in the BFSI sector looks like.
Related Blog Post
Simplify All Your Loans Into One Affordable EMI
Customers Served
Debt Consolidated
1200+ Reviews
Locations in India
Club all Loans & Credit Card Bills into Single EMI
Quick Apply Loan
Consolidate your debts into one easy EMI.
Takes less than 2 minutes. No paperwork.
10 Lakhs+
Trusted Customers
2000 Cr+
Loans Disbursed
4.7/5
Google Reviews
50+
Banks & NBFCs Offers
Other services mentioned in this article
On July 23rd, 2025, the Reserve Bank of India (RBI), in its latest monthly bulletin, has highlighted that the savings deposit rates of many Public Sector Banks (PSBs) are offering the lowest interest rates on savings bank accounts. These interest rates are the lowest in the last 11 years.
This may be a macroeconomic strategy to manage liquidity and inflation, but it raises serious concerns about the safety and return on customers’ idle funds.
The issue not only affects savers, especially pensioners and middle-income households, but also raises a broader question: What if banks did not operate under strict regulatory norms or failed to safeguard depositor interests?
According to the July 2025 RBI Bulletin, the savings deposit rates in some public sector banks have dropped to as low as 2.7%. This is a steep fall when compared to the average rate of around 4%–4.5% prevalent over the last decade.
As seen above, PSBs are offering notably lower rates than private sector banks, putting traditional savers at a disadvantage.
The RBI bulletin points out that public sector banks have been quicker to cut savings deposit rates compared to their private counterparts. This may be due to the higher market share of PSBs, which gives them a large depositor base and more pricing power.
Public sector banks have adopted a more aggressive stance in reducing rates, which helps in lowering their cost of funds but reduces income for depositors.
The drop in interest rates has significant implications. For millions of Indians who rely on interest from savings accounts, including retirees, homemakers, and small business owners, such low returns may erode purchasing power over time, especially in an inflationary environment.
This table clearly shows that the real return on savings is negative, meaning your money is losing value.
The Indian banking system is tightly regulated by the RBI, which mandates capital adequacy norms, deposit insurance, and prudential guidelines. These safeguards ensure that even if interest rates drop, customer deposits remain secure.
-0.30%
-0.5%
*T&C Apply
But imagine a scenario where banks operated without such oversight, arbitrary rate changes, non-guaranteed deposits, and unchecked mismanagement could wreak havoc on public trust and financial stability.
Regulatory frameworks are what differentiate an effective banking ecosystem from those plagued with collapses and fraud.
In light of falling deposit rates, savers are exploring other avenues like:
These alternatives, however, require financial literacy and some risk appetite — areas where many rural and older Indian savers may fall short.
The decreasing interest rates is one of the reasons why the growth of bank deposits in India slowed down to 10.6 per cent year-on-year in the financial year ended March 2025 as compared to 13 per cent in FY 2024-2025.
While declining savings rates have drawn attention, there is a broader concern around the adequacy and implications of India’s deposit insurance mechanism. The Deposit Insurance and Credit Guarantee Corporation (DICGC), a subsidiary of the RBI, currently insures each depositor up to ₹5 lakh per bank.
This coverage, introduced post the PMC Bank crisis, now protects approximately 98% of all deposit accounts by number and about 50.9% by value.
While such coverage offers peace of mind to small depositors, financial experts have raised concerns about moral hazard, a situation where excessive safety nets may encourage riskier behaviour by both banks and depositors.
A depositor, assured of protection, may not scrutinise a bank's financial health, while banks may take on undue risks, knowing customer withdrawals are unlikely in the short term.
International comparisons show that while countries like the US and UK offer higher insurance coverage in absolute terms, they balance this with stricter capital, liquidity, and supervisory norms.
India, while offering broad coverage, must therefore continue strengthening its risk-based supervision framework to avoid unintended consequences of over-insurance.
Other News Pages | |||
Retail Mortgage Loans by NBFCs, HFCs to Hit ₹20 Trillion by FY28 | |||
.png&w=3840&q=75)
