New Delhi: State Bank of India (SBI) chairman Challa Sreenivasulu Setty has called for taxation parity between bank deposits and equity investments to boost household savings and channel more funds into productive sectors, according to reports. Speaking ahead of the upcoming Union Budget, Setty emphasized aligning tax treatments to make fixed deposits as attractive as stock market gains, addressing a long-standing imbalance that skews investor behavior.
Reports said Setty highlighted that while long-term capital gains from equities enjoy a 12.5% tax rate with indexation benefits removed, interest income from bank deposits faces slab rates up to 30% without similar relief. “There should be parity in taxation between bank deposits and equity investments,” he stated during an interaction with media, advocating for a uniform 12.5% tax on deposit interest held over three years. This reform, he argued, would encourage retail participation in capital markets while stabilizing bank deposit growth amid competition from mutual funds and stocks.
Reports said the remarks come as India’s banking sector grapples with moderating deposit mobilization, with household savings shifting toward equities post-2024 market reforms. RBI data shows deposit growth lagging credit expansion at 11.3% versus 15.2% year-on-year, prompting calls for fiscal incentives. Setty noted SBI’s retail deposit base remains robust at ₹45 lakh crore, but parity would sustain funding for infrastructure and MSMEs without raising lending rates, the reports said.
Budget 2026-27, slated for February 1 under finance minister Nirmala Sitharaman, faces pressure to balance fiscal consolidation with growth. Setty’s pitch aligns with industry demands from FICCI and CII for simplified TDS on deposits above ₹40,000 annually and enhanced Section 80C deductions. He also urged expanding the ₹3 lakh presumptive tax limit for small businesses to ₹5 lakh, easing compliance for 6 crore MSME units, the reports added.
