Why 1-3 Year FDs Are Surging: Interest Rate Uncertainty Drives Investor Choice

• Banks see a large portion of term deposits concentrated in the 1-3 year period, making it the 'preferred bucket' for customers and banks.
• Uncertainty in interest rates and compressed term structure (low additional returns for longer tenures) are driving demand for medium-term FDs.
• The 1-3 year tenure aligns with banks' asset-liability management, reducing the need for very long-term liabilities due to EBLR-linked loan pricing.
• A decline in 7-8% interest rate offerings suggests high-interest rate periods are receding, prompting customers to choose medium-term options for quick renewal.
• Deposit growth lags loan growth, making 1-3 year FDs a predictable funding source for banks, though it may increase future renewal risk.