Best printers for Home

Best Mixer Grinder

Best wired Earphones

Best 43 Inch TV in India

Best Wi Fi Routers

Best Home Theatre in India

Smart Watch under 5000

Best Laptops for Education

Best Laptop for Students

<div type="image" title="Are Indians depositing less money in banks, or more in mutual funds? Turns out, it&amp;#39;s neither of those." msid="113663806" hostid="261" sizebytes="1121785"></div> Over the past few months, there’s been a lot of brouhaha about the lagging pace of <keyword id="20202062" type="General" weightage="20" keywordseo="bank-deposits" source="keywords">bank deposits</keyword> in India. Simply put, the rate at which Indians are depositing their hard-earned money in banks has been falling constantly, and some blame the increasing financialisation of <keyword id="20751315" type="General" weightage="20" keywordseo="household-savings" source="keywords">household savings</keyword> in the country or the rising preference of Indians towards <keyword id="19929240" type="General" weightage="20" keywordseo="mutual-funds" source="keywords">mutual funds</keyword> and shares. So, the hypothesis is that people are choosing to invest more in mutual funds and the Indian <keyword id="19949641" type="General" weightage="20" keywordseo="equity-markets" source="keywords">equity markets</keyword> through direct investments, IPOs, or NFOs, the money flowing into Indian banks in the form of deposits is slowing down. But is that really the case? <h2>A crisis or a phase?</h2><keyword id="19899808" type="General" weightage="20" keywordseo="RBI" source="keywords" meta.keywordsubtype="org" meta.entityname="RBI" meta.hostid="261" meta.entityid="RBI">RBI</keyword> data suggested that for the quarter ended June 2024, bank deposits grew at 11.7%. On the other hand, credit growth has outpaced this at 15%. This means that the outflow from banks as loans is far greater than the inflow into them in the form of deposits in Q1 of FY 2024-25. The situation largely saw cut-copy-paste in the first week of September as well, with loans registering a 13.3% YoY growth during the period, while deposits rose only 11.1%. This gap has only been widening for the last 3 years. Since deposits are how banks gather assets to further lend and earn interest income as a consequence, even a slight dip could set the alarm bells ringing for banks, and rightfully so. And truth be told, mutual funds are indeed taking on bank deposits in a big way. Per a report by Franklin Templeton, in August 2024, the AUM (assets under management) of Indian mutual funds, or the total funds managed by them, stood at 31.3% of total bank deposits in the country, up from 24.20% during the year-ago period. As of August 2024, the AUM of mutual funds stood at Rs 66.17 lakh crore, an all-time high. But all said and done, is this really the reason why the rate of bank deposits is falling behind? SBI has dismissed this to be a “statistical myth”, and experts point out that since equity and fund houses also keep the cash in their respective bank accounts, there’s no cause for concern. So, is financialization really to be blamed for the trailing tempo of deposits? Or is something else happening behind the scenes? We take a closer look: <h2>First, are household deposits really slowing down? And is that a cause of concern?</h2>Data from Motilal Oswal suggests the contrary. Deposits grew by around 10.4% between March 2020 and August 2024. Data from RBI also highlights that as of August 9, 2024, bank deposits witnessed a YoY growth of 10.8%. The loan-to-deposit ratio for the retail segment, which indicates what percentage of its total deposits the banks lend out as loans, has stayed at 77.5%, above the 77% mark for the tenth straight month. <div type="image" title="Yes, household deposits (as % of total deposits) have dipped, but the drop is far from significant" msid="113663882" hostid="261" sizebytes="306706"></div> Also, we can’t forego the fact that the share of Indian households in bank deposits has indeed slowed down. However, data from Axis AMC shows that the dip is marginal—from 63% in 2022 to 62% in 2023 and 61% in 2024. What has slowed down even more considerably is the share of government deposits in the aggregate bank deposits, which has dipped from 14% in 2018 to 9% in 2024. So, it's not just household deposits, you see. Moreover, as of March 2024, the collective CASA ratio (current and <keyword id="114757" type="General" weightage="20" keywordseo="savings-account" source="Orion">savings account</keyword> deposits) of all commercial banks in India stood at 41.00%, down from 43.1% in March 2023 and 45.2% in March 2022, marking a nearly 5% point decline over the past year, while still staying over the 10-year average of 39.2%. This implies that Indian banks are relying more on higher-cost funds (savings accounts), which can limit their profitability. <h2>What is this financialisation of savings we are talking about?</h2>Then again, there is no doubt about the growing affinity of Indians towards mutual funds and stock markets. Recent data from CBDT (Central Board of Direct Taxes) highlights that India’s net direct tax collection surged by around 22%, driven exclusively by the significant uptick in the collection of Securities Transaction Tax (STT), which doubled to Rs 26,154 crore, from Rs 13,352 crore in the year-ago period. Why does this matter? STT is levied when you buy or sell equity shares on stock exchanges, sell <keyword id="6361918" type="General" weightage="20" keywordseo="equity-mutual-funds" source="Orion">equity mutual funds</keyword>, and trade in futures and options in the equity segment. Such taxes, including the multiple other taxes in equity market investments, are considered as leakages as the money moves out of the economy into government coffers. Data from a ValueQuest report explains that over the last 20 years, the markets have handsomely rewarded the investors, generating over $900 billion in incremental value for them. This is the major driver behind the dramatic rise in investment flowing towards the equity markets. There’s further proof of this budding romance, if you check the demat pudding. The number of demat accounts, which are a primary requisite for participating in the stock markets, also burgeoned by 42.3 lakh in August 2024, taking India’s total tally of demat accounts beyond 17 crore. To put this in perspective, this is almost equivalent to the population of just 8 nations in the world, including China, the US, Brazil and more. Vivek Iyer, Partner, Grant Thornton Bharat thinks it's rather important, as well. “Financialisation of household savings in India is an indication of deepening capital markets in the market, especially from a retail investor standpoint. Bank deposits with a modest rate of return are no longer the only option for savings for investors. Investors today have more avenues for wealth creation in the form of public capital markets, which have democratized wealth creation and provided equality of opportunity to retail investors”, he says. Yes, Indians are investing more and more in the markets, and in mutual funds. But is it a sin to look out for inflation-beating returns, which the stock markets offer, and vanilla bank deposits don't? After all, the allure of 12-13% annual returns offered by <keyword id="45369" type="General" weightage="20" keywordseo="equities" source="Orion">equities</keyword> can certainly pale the stability offered by good old deposits, which generally do not go beyond 9% when it comes to annual returns. But all of this is not what is behind the slowdown. India is still a toddler in the school of savings financialization, with less than 10% of the population holding a demat account, and less than 5% of us saving in equities. That's a drop in the ocean of deposits, far inadequate to trigger a tsunami. <h2>Tell me why lagging deposits have nothing to do with Indians investing more in mutual funds!</h2>Says Shweta Rajani, Head - Mutual Funds, Anand Rathi Wealth Limited, “Households' equity holdings composition grew from 11.1% in FY 23 to 14.7% in FY 24. This trend reflects a growing awareness of investment options, empowering individuals to take control of their financial futures. Despite this transition towards equities, banks still hold a significant share of household financial savings—33.5% in FY24 compared to 34.9% in FY23”. Also, household savings and their subsequent financialization do not have much to do with deposit creation, which is entirely made by banks. What actually drives increased deposits is credit growth or increased lending. When interest rates are eased, people tend to borrow more and spend more, which circulates more money in the economy. For the past 4 years, RBI has been tightening the screws on interest rates, which raises the cost of borrowings, and makes it more expensive to take loans, putting a dampener on credit growth, but effectively curbing inflationary pressures. The last time RBI cut the repo rate by 40 basis points was back in May 2020, 4 years ago. The lag in <keyword id="19998084" type="General" weightage="100" keywordseo="deposit-growth" source="keywords">deposit growth</keyword> we’re witnessing is almost 3 years old. Coincidence much, or just good old economics at work? But with the Fed recently setting a rate cut precedent by slashing 50 bps off its interest rate, RBI is expected to follow suit in the next MPC (Monetary Policy Committee) meeting, scheduled for November 2024. A rate cut would ease the aforementioned high cost of borrowing, and increase loan-taking for corporates and institutional investors, thereby stoking consumption in the economy. And then, deposit creation in banks is likely to return to its former glory. If not, then that would be a curious case to unravel! But that worry is for another day. Do you have insights or personal experience to share on your personal finances or money? Contact us at <a target="_blank" class="c-link" href="mailto:businessinsider@timesinternet.in">businessinsider@timesinternet.in</a>.

Simply Put: A Deposit Dilemma — What's the fuss about a crisis in Indian bank deposits? Are mutual fund investments to blame?

Over the past few months, there’s been a lot of brouhaha about the lagging pace of bank deposits in India. Simply put, the rate at which Indians are depositing their hard-earned money in banks has been falling constantly, and some blame the increasing financialization of household savings in the country, or the rising preference of Indians towards mutual funds and shares. So, the hypothesis is that people are choosing to invest more in mutual funds and the Indian equity markets through direct investments, IPOs, or NFOs, the money flowing into Indian banks in the form of deposits is slowing down. But is that really the case? <h2>A crisis or a phase?</h2><keyword id="19899808" type="General" weightage="20" keywordseo="rbi" source="keywords">RBI</keyword> data suggested that for the quarter ended June 2024, bank deposits grew at 11.7%. On the other hand, credit growth has outpaced this at 15%. This means that the outflow from banks as loans is far greater than the inflow into them in the form of deposits in Q1 of FY 2024-25. The situation largely saw cut-copy-paste in the first week of September as well, with loans registering a 13.3% YoY growth during the period, while deposits rose only 11.1%. This gap has only been widening for the last 3 years. Since deposits are how banks gather assets to further lend and earn interest income as a consequence, even a slight dip could set the alarm bells ringing for banks, and rightfully so. And truth be told, mutual funds are indeed taking on bank deposits in a big way. Per a report by <keyword id="20250971" type="General" weightage="20" keywordseo="franklin-templeton" source="keywords">Franklin Templeton</keyword>, in August 2024, the AUM (assets under management) of Indian mutual funds, or the total funds managed by them, stood at 31.3% of total bank deposits in the country, up from 24.20% during the year-ago period. As of August 2024, the AUM of mutual funds stood at Rs 66.17 lakh crore, an all-time high. But all said and done, is this really the reason why the rate of bank deposits is falling behind? SBI has dismissed this to be a “statistical myth”, and experts point out that since equity and fund houses also keep the cash in their respective bank accounts, there’s no cause for concern. So, is financialization really to be blamed for the trailing tempo of deposits? Or is something else happening behind the scenes? We take a closer look: <h2>First, are <keyword id="4000333" type="General" weightage="100" keywordseo="household-deposits" source="Orion">household deposits</keyword> really slowing down? And is that a cause of concern?</h2>Data from Motilal Oswal suggests the contrary. Deposits grew by around 10.4% between March 2020 and August 2024. Data from RBI also highlights that as of August 9, 2024, bank deposits witnessed a YoY growth of 10.8%. The loan-to-deposit ratio for the retail segment, which indicates what percentage of its total deposits the banks lend out as loans, has stayed at 77.5%, above the 77% mark for the tenth straight month. Also, we can’t forego the fact that the share of Indian <keyword id="20319599" type="General" weightage="20" keywordseo="households" source="keywords">households</keyword> in bank deposits has indeed slowed down. However, data from Axis AMC shows that the dip is marginal—from 63% in 2022 to 62% in 2023 and 61% in 2024. What has slowed down even more considerably is the share of government deposits in the aggregate bank deposits, which has dipped from 14% in 2018 to 9% in 2024. So, it's not just household deposits, you see. Moreover, as of March 2024, the collective CASA ratio (current and savings account deposits) of all commercial banks in India stood at 41.00%, down from 43.1% in March 2023 and 45.2% in March 2022, marking a nearly 5% point decline over the past year, while still staying over the 10-year average of 39.2%. This implies that Indian banks are relying more on higher-cost funds (savings accounts), which can limit their profitability. <h2>What is this financialisation of savings we are talking about?</h2>Then again, there is no doubt about the growing affinity of Indians towards mutual funds and stock markets. Recent data from CBDT (<keyword id="19942037" type="General" weightage="20" keywordseo="central-board-of-direct-taxes" source="keywords">Central Board of Direct Taxes</keyword>) highlights that India’s net direct tax collection surged by around 22%, driven exclusively by the significant uptick in the collection of <keyword id="20930760" type="General" weightage="20" keywordseo="securities-transaction-tax" source="keywords">Securities Transaction Tax</keyword> (STT), which doubled to Rs 26,154 crore, from Rs 13,352 crore in the year-ago period. Why does this matter? STT is levied when you buy or sell equity shares on stock exchanges, sell equity mutual funds, and trade in futures and options in the equity segment. Such taxes, including the multiple other taxes in equity market investments, are considered as leakages as the money moves out of the economy into government coffers. Data from a ValueQuest report explains that over the last 20 years, the markets have handsomely rewarded the investors, generating over $900 billion in incremental value for them. This is the major driver behind the dramatic rise in investment flowing towards the equity markets. There’s further proof of this budding romance, if you check the demat pudding. The number of demat accounts, which are a primary requisite for participating in the stock markets, also burgeoned by 42.3 lakh in August 2024, taking India’s total tally of demat accounts beyond 17 crore. To put this in perspective, this is almost equivalent to the population of just 8 nations in the world, including China, the US, Brazil and more. Vivek Iyer, Partner, Grant Thornton Bharat thinks it's rather important, as well. “Financialisation of household savings in India is an indication of deepening capital markets in the market, especially from a retail investor standpoint. Bank deposits with a modest rate of return are no longer the only option for savings for investors. Investors today have more avenues for wealth creation in the form of public capital markets, which have democratized wealth creation and provided equality of opportunity to retail investors”, he says. Yes, Indians are investing more and more in the markets, and in mutual funds. But is it a sin to look out for inflation-beating returns, which the stock markets offer, and vanilla bank deposits don't? After all, the allure of 12-13% annual returns offered by equities can certainly pale the stability offered by good old deposits, which generally do not go beyond 9% when it comes to annual returns. But all of this is not what is behind the slowdown. India is still a toddler in the school of savings financialization, with less than 10% of the population holding a demat account, and less than 5% of us saving in equities. That's a drop in the ocean of deposits, far inadequate to trigger a tsunami. <h2>Tell me why lagging deposits have nothing to do with Indians investing more in mutual funds!</h2>Says Shweta Rajani, Head - Mutual Funds, Anand Rathi Wealth Limited, “Households' equity holdings composition grew from 11.1% in FY 23 to 14.7% in FY 24. This trend reflects a growing awareness of investment options, empowering individuals to take control of their financial futures. Despite this transition towards equities, banks still hold a significant share of household financial savings—33.5% in FY24 compared to 34.9% in FY23”. Also, household savings and their subsequent financialization do not have much to do with deposit creation, which is entirely made by banks. What actually drives increased deposits is credit growth or increased lending. When interest rates are eased, people tend to borrow more and spend more, which circulates more money in the economy. For the past 4 years, RBI has been tightening the screws on interest rates, which raises the cost of borrowings, and makes it more expensive to take loans, putting a dampener on credit growth, but effectively curbing inflationary pressures. The last time RBI cut the repo rate by 40 basis points was back in May 2020, 4 years ago. The lag in deposit growth we’re witnessing is almost 3 years old. Coincidence much, or just good old economics at work? But with the <keyword id="19900043" type="General" weightage="20" keywordseo="fed" source="keywords">Fed</keyword> recently setting a rate cut precedent by slashing 50 bps off its interest rate, RBI is expected to follow suit in the next <keyword id="19918491" type="General" weightage="20" keywordseo="mpc" source="keywords">MPC</keyword> (Monetary Policy Committee) meeting, scheduled for November 2024. A rate cut would ease the aforementioned high cost of borrowing, and increase loan-taking for corporates and institutional investors, thereby stoking consumption in the economy. And then, deposit creation in banks is likely to return to its former glory. If not, then that would be a curious case to unravel! But that worry is for another day.

A Deposit Dilemma — What's the fuss about a crisis in Indian bank deposits? Are mutual fund investments to blame?

The State Bank of India (<keyword id="19898108" type="General" weightage="20" keywordseo="sbi" source="keywords">SBI</keyword>) in its latest report has asked for <keyword id="20213295" type="General" weightage="20" keywordseo="tax-reforms" source="keywords">tax reforms</keyword> after concerns were flagged over the recent decline in <keyword id="20202062" type="General" weightage="100" keywordseo="bank-deposits" source="keywords">bank deposits</keyword>. The report says tax Reforms for Deposits can accentuate the banking system's stability and resilience to the next level. SBI attributed the fall in deposits to the varied rates of return offered by different <keyword id="20139443" type="General" weightage="20" keywordseo="investment-options" source="keywords">investment options</keyword> for similar time frames and different tax rates on <keyword id="22837794" type="General" weightage="20" keywordseo="returns-on-deposits" source="keywords">returns on deposits</keyword>. The <keyword id="20352499" type="General" weightage="20" keywordseo="SBI-report" source="keywords">SBI report</keyword> said that "<keyword id="20658792" type="General" weightage="20" keywordseo="tax-treatment" source="keywords">Tax treatment</keyword> of bank and non-bank channels are non-uniform, even as bank deposits have a wider and denser pass-through effect across the populace sensitivity of Deposits on Tax is as much as 7 per cent" The report noted that a bank deposit of Rs 10 lac in a Savings Bank (SB) account at an investment return of 3 per cent would generate Rs 30,000 in returns and after accounting for taxes and exemptions, the <keyword id="22837795" type="General" weightage="20" keywordseo="net-return" source="keywords">net return</keyword> would be Rs 16,000. The report adds that the net returns vary significantly if deposits are made in different instruments like <keyword id="21041176" type="General" weightage="20" keywordseo="term-deposits" source="keywords">term deposits</keyword>, short and long-term investments in debt funds, liquid funds or bonds. The tax rates on these deposits also favour saving banks or term deposits. The report illustrates a term deposit of up to one year with the same principal amount of Rs 10 lac at a yield of 6.25 per cent would result in a net return of Rs 50,000 after taxes. But for term deposits exceeding one year the interest rate is higher and with an interest rate of 7.25 per cent, the gross return would be Rs 72,500. After taxes, the net return would be Rs 58,000. The data highlights that similar type of investments for the same period generates significantly different returns because of different tax treatment by the government. Similar variations are observed in other <keyword id="20105084" type="General" weightage="20" keywordseo="investment-plans" source="keywords">investment plans</keyword> as well. For instance, investments in equity and mutual funds with a 2 per cent dividend income of Rs 10,00,000 generate Rs 20,000, which after taxes the net return is Rs 16,000. However, Short-term investments of less than one year in equity and mutual funds, offering an 11 per cent return generate Rs 1,10,000, with a net return of Rs 88,000 after taxes. This investment if made in Long-term investments of more than one year the return increases to 15% on Rs 10,00,000 and generates Rs 1,50,000 annually. With a lower tax bracket of 12.5 per cent tax on long-term investments and applicable exemptions, the net return is Rs 1,43,750. These variations in returns across different deposits and investment options highlight the complexity and thus investors are choosing the higher return options over the bank deposits which in turn poses a threat to the deposit growth in the banking sector.

Decline in bank deposits because of non-uniform tax treatment on various investment options: SBI report

<ul class="summary-list"><li>My bank has lowered the APY on my high-yield savings account by almost half a percent recently.</li><li>I'm not happy that my cash is generating less returns now, and I don't know what to do.</li></ul>It's never pleasant to receive an email from your bank informing you that the interest rate on your <a target="_blank" class="" href="https://www.businessinsider.com/personal-finance/banking/best-high-yield-savings-accounts-rates-right-now">high-yield savings account</a> is decreasing.Unfortunately, like many Americans happy to collect a robust yield on their savings, I've gotten three of these notifications in the last three months as the Federal Reserve has begun to lower interest rates. From August until the end of October, the annual percentage yield (APY) on my high-yield savings account has fallen from 4.6% to 4.2%.I opened this bank account almost two years ago, right after graduating from college. Back in 2023, with inflation still elevated, interest rates were at their highest levels since the Great Financial Crisis, and it seemed like most banks were offering near-5% yields on savings. After paying off my bills every month, I would put the remainder of my paycheck into my high-yield savings account and watch the number creep up.Now, it looks like the days of a 5% APY are in the past. In September, the Federal Reserve dished out a 50 basis-point rate cut, signifying the beginning of the end for high rates. Continuing this trend, the central bank's chair, Jerome Powell, announced a <a target="_blank" href="https://www.businessinsider.com/federal-reserve-cuts-interest-rates-quarter-point-powell-inflation-election-2024-11">25 basis-point cut</a> last week, and is expected to slash rates further in the months ahead.Is there anything I can do about the state of my savings account, or do I have to watch my yield erode away slowly? Curious, I asked three financial experts for their advice on this topic.As a famous politician once said, we didn't just fall out of a coconut tree. Context is important. Patti Black, a financial advisor at Savant Wealth Management, reminded me that the recent high interest rate environment is a marked departure from the last decade, where interest rates were near zero and there was no yield on cash to be found. So, while yields dropping from nearly 5% might seem like a tough pill to swallow for someone like me who just opened an account in the last couple of years, it's still a pretty good deal when you consider where rates have been in the past.I didn't have a bank account during the post-2008 zero-interest rate policy era, so this was helpful context to have. Perhaps my generation is indeed coddled — first by our parents and now by Jerome Powell's post-pandemic rate hikes.Black also suggested that I switch up my perspective. While a rate-cutting cycle means less return on my cash, it also means lower borrowing costs for a car loan or a mortgage, which is good news for the housing market.But there are other options for where I can have my money sit, Black said. Of course, one alternative is a <a target="_blank" href="https://www.businessinsider.com/cd-rates-certificate-deposit-high-interest-where-to-invest-now-2024-10">certificate of deposit</a> (CD), which is essentially a savings account that holds money at a fixed interest rate for a fixed period of time. CDs generally pay higher interest rates than savings and money market accounts in exchange for locking up your money for anywhere between three months to many years. However, my hands are a little tied. A well-known rule of thumb is to keep three to six months of living expenses available in your bank account as an emergency fund (read: liquid and highly accessible), so it's not a good idea to lock up money in my high-yield savings account for a prolonged period time. I could withdraw my money from the CD if needed, but I'd have to pay back some or all of the interest I'd generated up until that point as a penalty.With this in mind, Black said that sometimes it doesn't matter what the rate on the high-yield savings account is — it's the best place to park cash for easy access.Armed with this context, I still wanted to see if there were more ways to put my cash to work for me.Daniel Milan, financial advisor at Cornerstone Financial Services, had some more thoughts on CDs. A three-month CD could be a good option if I were comfortable locking up my money for that period of time, according to Milan.My bank didn't offer CDs, so I would need to open up a new bank account, which isn't necessarily a bad thing. Some financial experts recommend having <a target="_blank" class="" href="https://www.businessinsider.com/personal-finance/banking/how-many-savings-accounts-can-you-have">multiple bank accounts</a> for different savings goals. Searching online, I saw <a target="_blank" href="https://www.businessinsider.com/personal-finance/banking/best-3-month-cd-rates">multiple options</a> yielding over 4.6%.However, Milan didn't recommend locking up my money for longer. Usually, the longer the term of the CD, the higher the rate. But that's not always the case in today's market."In this current environment, it makes no sense to go further out than three months on a CD because the three-month CD is paying you more than a one-year or two-year right now," Milan said.Looking at CD offerings from a variety of banks, I discovered that this was indeed true — generally, the longer the CD duration, the lower the rate, especially after a 1-year duration. Rates on 6-month and 9-month CDs were also attractive depending on the bank, but again, my liquidity needs take those off the table.Many of the banks I looked at didn't offer short-term CDs, either. For example, one option offered a 4.5% APY on an 11-month CD, 3.7% on a 2-year, and 3.5% on a 5-year.It wouldn't make sense to move my money out of my savings account without high enough compensation for the lower liquidity."You're not getting paid for that illiquidity," Milan told me.Short-term <a target="_blank" href="https://markets.businessinsider.com/bonds">Treasury bills</a> are another investment option for higher yield, and they offer more liquidity than CDs, according to Richard McHorter, a private wealth advisor at SRM Private Wealth. A three-month Treasury bill currently yields 4.43%.There's also the added benefit of tax savings, which is especially appealing for McHorter, who lives in California: "If you're a resident of a high-income tax state, I would be looking at Treasury bills."As a resident of New York City, the idea of lower taxes certainly appeals to me. If I were to buy Treasury bills, I would only need to pay federal taxes, bypassing state and local income taxes.McHorter also said that there's a lot of uncertainty about interest rates right now, and they could actually start going back up again. Trump's proposed <a target="_blank" class="" href="https://www.businessinsider.com/trump-tariffs-hit-company-stock-profits-hardest-china-investing-manufacturing-2024-11">tariff policies</a> could increase inflation, in which case the Fed would probably increase rates to combat an overheating economy, he said.If I buy a three-month Treasury bill, I can reassess the inflation situation when I get my money back in three months and reinvest it accordingly, McHorter said.When it comes to interest rates and inflation, pay attention to the data and don't try to predict the market with your money, Milan advised. <a target="_blank" href="https://www.businessinsider.com/federal-reserve-cuts-interest-rates-quarter-point-powell-inflation-election-2024-11">Jerome Powell</a> himself has said that it's too soon to say how the election results could reshape markets and interest rates."My advice to anybody would be: just be diligent in reading and interpreting the data as it comes out," Milan said. Watch inflation data and Fed commentary, and base your investing decisions on the information you have at hand.It feels like the market is a bit in limbo as everyone waits for the effects of the election to ripple through, but as Black mentioned, not taking any action right now isn't the worst decision.What's next? For starters, I'm going to sit down and crunch some numbers for what three to six months of living expenses look like for me and keep that in my high-yield savings account. With the money I have left over, I have some good options.Are you a Gen-Zer who has recently been faced with an investing predicament? Feel free to reach out to Christine at <a target="_blank" href="mailto:cji@businessinsider.com">cji@businessinsider.com</a> to share your story.

The interest rate on my high-yield savings account keeps dropping. I asked 3 experts how to earn more on my cash.

<keyword id="22661695" type="General" weightage="20" keywordseo="Regulatory-moves" source="Orion">Regulatory moves</keyword> discouraging <keyword id="19972907" type="General" weightage="20" keywordseo="retail-investors" source="keywords">retail investors</keyword>' <keyword id="22661696" type="General" weightage="20" keywordseo="derivative-market-bets" source="Orion">derivative market bets</keyword> may help the <keyword id="59197" type="General" weightage="20" keywordseo="banking-system" source="Orion">banking system</keyword> garner the much-needed <keyword id="6496248" type="General" weightage="20" keywordseo="deposits" source="Orion">deposits</keyword>, <keyword id="46004" type="General" weightage="20" keywordseo="SBI-Chairman" source="Orion">SBI Chairman</keyword> <keyword id="1937145" type="General" weightage="20" keywordseo="Dinesh-Kumar-Khara" source="Orion">Dinesh Kumar Khara</keyword> has said. Khara said the budget announcements like the tweaks on the short-term and long-term capital gains will not lead to much gains from a deposit accretion perspective. "<keyword id="20031465" type="General" weightage="100" keywordseo="FO" source="keywords">F&amp;O</keyword> (future and options) kind of things are being discouraged for the retail (investor) by the regulator. Those who are resorting to such kind of an instrument, they might come back to the banking system," Khara told PTI over the weekend. It can be noted that concerns over losses incurred by 90 per cent of investors in the derivative trades have led to fears of household savings being blown in speculation rather than being deployed for productive purposes among policymakers. As per <keyword id="20033427" type="General" weightage="20" keywordseo="capital-markets" source="keywords">capital markets</keyword> regulator Sebi, retail investors lost Rs 52,000 crore in such activity in FY24 alone which necessitates a clampdown. Sebi has come up with a seven-point plan to reduce such trades, while some moves in the Union Budget are also targeted to reduce such activities. For the last three years, the deposit growth is unable to keep pace with credit expansion, and Khara said the money is going into alternative avenues like capital markets. He, however, stressed that the bank account is the primary avenue for parking the savings and continue to attract interest, and reminded that there was a phase of deposit growth trailing credit growth in 2011 as well witnessed by the banking system. At present, concerns are being raised about the wedge between the deposit and credit growth leading banks to go slower on granting loans, which can be be detrimental for the overall economic growth. <keyword id="19898108" type="General" weightage="20" keywordseo="SBI" source="keywords" meta.keywordsubtype="org" meta.entityname="SBI" meta.hostid="153" meta.entityid="SBI">SBI</keyword>, the country's largest lender which commands over a fifth of market share, is targeting a credit growth of 15 per cent in FY25 and a deposit growth of 8 per cent, Khara said. Stating that the bank will try to get the deposit growth at 10 per cent, he made it clear that the credit growth target can be achieved even with a slower pace of deposit growth of 8 per cent due to its liquidity position. The bank chose to deploy excess deposits in the past into its investment book and is currently unwinding the same as it caters to the credit demand, Khara said. He said the bank's liquidity coverage ratio stands at 128 per cent and it has decided to keep it over 110 per cent.

Discouraging retail play in F&O may help banks garner deposits: SBI Chairman

New Delhi [India], July 19 (ANI): Households are choosing the <keyword id="20033427" type="General" weightage="20" keywordseo="capital-markets" source="keywords">capital markets</keyword> over the <keyword id="19934118" type="General" weightage="20" keywordseo="banks" source="keywords">banks</keyword> to park or invest their <keyword id="25450" type="General" weightage="20" keywordseo="savings" source="Orion">savings</keyword>, highlighted <keyword id="64190" type="General" weightage="20" keywordseo="RBI-Governor" source="Orion">RBI Governor</keyword> <keyword id="3083263" type="General" weightage="20" keywordseo="Shaktikant-Das" source="Orion">Shaktikant Das</keyword> during his address at FE Modern BFSI (Banking, Financial Services, and Insurance) Summit 2024 on Friday. Governor Das highlighted that traditionally, banks were the primary choice for households to invest their money. However, there has been a noticeable change in consumer behaviour, with a growing preference for capital markets and other <keyword id="5869841" type="General" weightage="20" keywordseo="financial-intermediaries" source="Orion">financial intermediaries</keyword>. He noted, "Households and consumers who traditionally leaned on banks for parking or investing their savings are increasingly turning to the capital markets and other financial intermediaries." This trend indicates a broader diversification of <keyword id="22469312" type="General" weightage="20" keywordseo="household-investments" source="Orion">household investments</keyword> into <keyword id="19929240" type="General" weightage="20" keywordseo="mutual-funds" source="keywords">mutual funds</keyword> and other savings tools, moving away from traditional investment tools. The Governor stated, "While bank deposits continue to remain dominant as a percentage of the financial assets owned by the households, their share has been declining, with households increasingly allocating their savings to Mutual Funds, Insurance Funds, and Pension Funds." Governor Das also pointed out that this shift in investment patterns has significant implications for the banking sector. Banks now need to explore alternative methods to bridge the gap between credit and deposits. He added, "On their part, banks have sought to fill the credit-deposit gap by increasing their reliance on other sources like short-term borrowings and certificates of deposit, etc. This increases their sensitivity to interest rate movements and poses challenges to liquidity management." The Governor further elaborated on the implications of the shift from CASA (Current Account Saving Account) deposits, stressing that banks must remain vigilant and adaptive. He stated that banks need to continuously focus on improving and refining their credit underwriting standards and the pricing of risks to maintain stability and profitability. Reflecting on recent global banking events, Governor Das drew attention to the banking crises in the US and Switzerland in 2023, which highlighted the risks and vulnerabilities inherent in certain business models. He emphasized the importance of learning from these crises to enhance the resilience of the banking sector. "The banking crisis in the US and Switzerland in 2023 has again brought into focus the risks to banking stability from certain business models and their inherent vulnerability," he added.

Household savings are choosing mutual funds over banks to invest savings: RBI Governor

<ul class="summary-list"><li>JPMorgan and Wells Fargo kick off bank earnings on Friday.</li><li>Expect lots of questions about how lower rates will impact business going forward.</li></ul>When Wall Street's biggest banks report earnings this week, led by JPMorgan Chase, investors will be listening closely for clues about how a changing interest-rate environment could impact business in 2025.The Federal Reserve in September cut the so-called federal funds rate by 50 basis points — <a target="_blank" href="https://markets.businessinsider.com/news/stocks/fed-interest-rate-cut-ai-stocks-nvidia-broadcom-asml-tech-2024-9?_gl=1*1ax8rwf*_ga*MzQwMzI0MDQ1LjE3MjEzMDM4ODI.*_ga_E21CV80ZCZ*MTcyODQ5MTE5OC4yOTAuMS4xNzI4NDkxMjEwLjQ4LjAuMA..">the central bank's first cut</a> in more than four years. The September 18 move took place too late to impact third-quarter results, but stock research analysts are expected to pepper executives this earnings season about what a lower interest-rate environment might mean for business going forward.Lower rates can be a mixed blessing for banks. On the one hand, the Fed's campaign to increase the cost of borrowing has contributed to an era of sky-high returns for traditional lenders like JPMorgan, which have been making more money on loans than they have been paying for deposits. But that party was never going to last forever. (Indeed, top JPMorgan exec <a target="_blank" href="https://www.ft.com/content/c11b59f6-4827-4c4e-9f24-2f075b85f665">Daniel Pinto warned last month</a> that stock analysts' so-called NII expectations were too high.)Plus, lower rates could help unleash <a target="_blank" href="https://www.businessinsider.com/goldman-sachs-2q-earnings-david-solomon-investment-banking-forecast-2024-7">the dealmaking backlog</a> that investment bankers have been talking about since the pandemic-era M&amp;A boom started to slow in 2022. Their bonuses are counting on it.Speaking of bonuses, third-quarter results will also be closely watched on Wall Street as an indication of how well investment bankers may get paid this year.JPMorgan and Wells Fargo will kick off earnings on Friday, followed by Goldman Sachs, Citi, and Bank of America on Tuesday. Morgan Stanley will report its earnings on Wednesday. Here are the top four things to look for this bank earnings season:<h2 id="629d7158-9393-4502-a5a4-b8a898b107c5">Investment banking</h2>Investment bankers have been predicting dealmaking will return since it started slowing in 2022. But this year, there are strong signs that companies are ready to start going public and merging again.<a target="_blank" href="https://www.businessinsider.com/megamergers-deals-m-a-wall-street-comeback-2024-9">Preliminary data compiled by LSEG</a> shows 425 mergers globally so far this year valued at more than $1 billion. That's up 24% from the same period in 2023. What's more, deals valued at greater than $10 billion were recently up 39% compared with the same period last year.The number of companies going public is also soaring. 106 US companies have gone public through the third quarter, raising a total of $24.7 billion, according to IPO tracker Renaissance Capital. That's up from 71 in 2022 and 108 in 2023 and on track to beat the $27 billion raised in those two years.Third-quarter results — and commentary about 4Q dealmaking so far — will be closely watched for further signs of progress in M&amp;A, equity underwriting, and debt underwriting.<h2 id="bf745d80-abee-4488-881c-e8551a17811c">Trading</h2>At the Barclays Financial Services conference in September, big bank executives warned that trading revenues may be muted compared to 2023.Goldman Sachs CEO David Solomon described a "more challenging macro environment, particularly in the month of August," and warned that the bank's trading business "is trending down close to 10%." Solomon cited the bank's revenues for FICC, or fixed-income, currencies and commodities, saying that results were "very, very strong" in the third quarter of 2023.At the same conference, JPMorgan's president and chief operating officer, Daniel Pinto, predicted that trading revenues would be "flat to slightly up 2%." "It was a bit more challenging environment to monetize client flows, particularly in rates," he said.<h2 id="723af9a4-99cc-49fd-b909-2fc736985cbb">Lending</h2>Stock analysts will be watching what banks say about net interest income, which is how much banks earn off the difference between what they pay on deposits and what they earn on loans. When the Fed started raising rates, banks were making out like bandits because they were able to charge more for loans more quickly than they were raising rates on savings accounts.But banks have been warning that this dichotomy wouldn't last forever, and loan growth has indeed been slowing as the economy slows. Lower rates could boost lending yet again, but that could take time. In the meantime, JPMorgan's Pinto in September warned that Wall Street stock analysts' 2025 predictions for NII of between $91.5 billion and $90 billion were too high, sending the bank's stock down."I think that that number will be lower," Pinto said at the Barclays Financial Services conference. "We are not going to guide on that now, but the $90 billion is a bit too high."<h2 id="b126e3af-7e38-4ed0-b6d7-4e67905737f9">Bonuses</h2>Banks tend not to talk about bonuses on earnings calls, but how bankers will be paid will be reflected in C-Suite comments about dealing and trading generally — as well as their predictions for the rest of 2024 and into next year.In good news, compensation expert Johnson Associates sees bonuses up this year across the board, an analysis that's reflective in part of <a target="_blank" href="https://www.osc.ny.gov/press/releases/2024/10/dinapoli-wall-streets-2024-first-half-profits-232b-were-793-higher-last-year">Wall Street's earnings results</a> so far this year. See here for the compensation expert's views on bonuses for debt underwriting, equity underwriting, sales and trading, and more.<div type="image" title="Wall Street bonus predictions" height="630" width="1950" msid="114096916" hostid="261" sizebytes="88820"></div>

4 trends to watch this bank earnings season

In a significant move, the <keyword id="19899810" type="General" weightage="20" keywordseo="reserve-bank-of-india" source="keywords">Reserve Bank of India</keyword> (<keyword id="19899808" type="General" weightage="100" keywordseo="rbi" source="keywords">RBI</keyword>) has imposed penalties on <keyword id="19952948" type="General" weightage="20" keywordseo="axis-bank" source="keywords">Axis Bank</keyword> and <keyword id="19895995" type="General" weightage="20" keywordseo="hdfc-bank" source="keywords">HDFC Bank</keyword> for lapses in regulatory and statutory compliance. The fines, which amount to a total of ₹2.91 crore, highlight the central bank's ongoing efforts to ensure that financial institutions adhere to prescribed guidelines. The RBI levied a penalty of ₹1.91 crore on Axis Bank for violations that included contraventions of the <keyword id="19976511" type="General" weightage="20" keywordseo="banking-regulation-act" source="keywords">Banking Regulation Act</keyword> and non-compliance with specific RBI directions related to interest rates on deposits, Know Your Customer (KYC) norms, and collateral-free loans for agriculture. Meanwhile, HDFC Bank faced a ₹1 crore fine for failing to comply with directions concerning interest rates, customer service practices, and the use of recovery agents. <h2>Axis Bank: Key regulatory failures</h2>Axis Bank’s penalty stems from a supervisory evaluation conducted by the RBI based on its financial position as of March 31, 2023. Upon reviewing the bank’s activities, the RBI found several areas of non-compliance. One of the primary issues was the opening of savings deposit accounts in the names of ineligible entities, a direct violation of regulatory norms. Additionally, Axis Bank was found to have issued multiple customer identification codes to certain clients instead of assigning a Unique Customer Identification Code (UCIC), which is mandatory to avoid duplication and ensure proper monitoring of accounts. The bank also violated guidelines concerning agricultural loans. RBI regulations prohibit banks from asking for collateral for agricultural loans up to ₹1.60 lakh, but Axis Bank had obtained such collateral in certain cases. Lastly, a wholly-owned subsidiary of Axis Bank was found to be engaged in providing technology services—an activity that is not permissible for a banking company. This contravention added to the overall penalty levied by the central bank. <h2>HDFC Bank: Regulatory shortcomings</h2> In the case of HDFC Bank, the RBI’s investigation was based on its financial position as of March 31, 2022. The central bank uncovered several violations, including the offering of gifts, specifically covering the first-year premium for complimentary life insurance, which exceeded the permissible limit of ₹250. Moreover, HDFC Bank was found to have opened savings accounts in the names of ineligible entities, a violation similar to that of Axis Bank. Another significant failure was the bank’s inability to ensure that customers were not contacted by bank officials outside the permitted time frame of 7 am to 7 pm. <h2>RBI's Stance on Compliance</h2> While the RBI has been stringent in penalising both banks, it clarified that these penalties are based on lapses in regulatory compliance and are not reflective of the validity of any transactions or agreements between the banks and their customers. The central bank’s message is clear—financial institutions must adhere strictly to guidelines to maintain transparency, protect customers, and uphold the integrity of the banking system. The penalties serve as a reminder to all banks to stay vigilant and maintain high standards of compliance to avoid such financial and reputational damage in the future. Both Axis Bank and HDFC Bank have accepted the fines and are expected to take corrective actions to avoid future infractions. For customers, this action from the RBI is a reassurance that regulatory oversight remains a priority to ensure fair banking practices across the country.

RBI slaps fine of Rs 2.91 crore on Axis Bank and HDFC Bank: All details

<ul class="summary-list"><li>The results of OpenAI CEO Sam Altman's guaranteed-basic-income study are in.</li><li>Overall spending increased, but most of the extra cash went to food and rent.</li></ul>The results are in for Sam Altman's much-anticipated basic-income study, one of the largest of its kind. The experiment gave low-income participants $1,000 a month for three years, no strings attached.Recipients put the bulk of their extra spending toward basic needs such as rent, transportation, and food, the study found. They also worked less on average but remained engaged in the workforce and were more deliberate in their job searches compared with a control group."Recipients had greater agency to make decisions that worked best for their lives and to prepare for the future, from moving neighborhoods to expressing interest in new business ventures," the report's authors said.Altman, the CEO of OpenAI, a leading artificial-intelligence company, raised $60 million for the study, including $14 million of his own money. <a target="_blank" class="" href="https://www.openresearchlab.org/studies/unconditional-cash-study/study">OpenResearch</a> conducted the study, which was led by the researcher Elizabeth Rhodes.It officially began in 2019 when 3,000 Texas and Illinois residents across urban, suburban, and rural areas enrolled. All of these residents had incomes below $28,000. A third got $1,000 a month for three years, while the rest — the control group — got $50 a month. No enrolled participants lost their existing benefits.The study found that those who received the $1,000 payments increased their overall spending by an average of $310 a month, but most of that spending went toward food, rent, and transportation. They also offered more financial support to others in need compared with the control group.Researchers, however, said they found no "direct evidence of improved access to healthcare or improvements to physical and mental health" among those who received $1,000 payments."We do see significant reductions in stress, mental distress, and food insecurity during the first year, but those effects fade out by the second and third years of the program," the report said, noting that $1,000 a month could only do so much. "Cash alone cannot address challenges such as chronic health conditions, lack of childcare, or the high cost of housing."<h2 id="f9fd84cd-91cb-426e-86a2-3a3a6135eb76">The debate over basic income</h2>The study was inspired by Altman's belief in the importance of a basic income in the age of AI, which some fear could render millions of jobs obsolete."It's impossible to truly have equality of opportunity without some version of guaranteed income," Altman said when announcing the project.The idea of a <a target="_blank" class="" href="https://www.businessinsider.com/how-people-spend-universal-basic-income-ubi-food-housing-transportation-2024-4">universal basic income</a> has been around for a while but rose to prominence as the center of Andrew Yang's 2020 presidential campaign. Other significant figures in the tech industry have since voiced support for some kind of basic income, including the Twitter cofounder Jack Dorsey and Tesla CEO Elon Musk. The AI godfather <a target="_blank" class="" href="https://www.businessinsider.com/ai-godfather-geoffrey-hinton-universal-basic-income-2024-5">Geoffrey Hinton recently advised the British government</a> to adopt a universal basic income to mitigate the number of "mundane jobs" AI could replace.A universal basic income would provide all people with direct cash payments, no strings attached. That's a hefty political lift, however. So many cities and states have experimented with guaranteed basic incomes instead. These programs provide cash payments without restrictions to select low-income or vulnerable populations. Altman's study falls into this camp as well.Data from dozens of these smaller programs have found that cash payments can help alleviate homelessness, unemployment, and food insecurity — though results still stress the need for local and state governments to invest in social services and housing infrastructure.Earlier this year, Altman also floated another kind of basic-income plan, which he called a "<a target="_blank" class="" href="https://www.businessinsider.com/openai-sam-altman-universal-basic-income-idea-compute-gpt-7-2024-5">universal basic compute</a>." In this scenario, Altman said, people would get a "slice" of the computational resources of the large language model GPT-7, which they could use however they liked."You own part of the productivity," he explained on a <a target="_blank" class="" href="https://podcasts.apple.com/us/podcast/all-in-with-chamath-jason-sacks-friedberg/id1502871393?i=1000655220554">podcast</a>.Even these smaller experiments, however, have <a target="_blank" class="" href="https://www.businessinsider.com/basic-income-opposition-discriminatory-universal-basic-income-argument-2024-4">faced political hurdles</a>. Conservatives in several states have challenged the programs, halting their progress.<h2 id="8ac87517-0da8-463d-9395-bf25b14d1489">The Altman study's findings</h2>In its results, Altman's study assessed both quantitative data, such as surveys and bank transactions, and qualitative data, such as interviews with recipients.The study found that compared with the control group, recipients' total individual savings in their bank accounts increased by nearly 25%. Recipients also spent $22 more a month on other people, or about 26% more than the control group. There was little impact on car or home ownership, though recipients of the $1,000 were more likely to move neighborhoods or pay for housing than the control group.Regarding healthcare, recipients saw slight increases compared with the control group in dental care, emergency-room visits, and healthcare spending — though there was no direct evidence of improved health.Recipients were more likely to want to have a budget and advance their education, specifically in the third year, compared with the control group. But there were no significant effects on educational attainment overall.The study, which began during the COVID-19 pandemic when unemployment was high, found that employment rates fell in the second and third years among recipients compared with the control group. On average, incomes rose significantly for all groups, though slightly higher for the control group. Incomes for recipients of the $1,000 rose from just under $30,000 to $45,710, while incomes for the control group started at a similar level but grew higher, to $50,970."Cash offers flexibility and may increase agency to make employment decisions that align with recipients' individual circumstances, goals, and values," the report's authors said.<h2 id="78870e8c-3763-4a7c-a1d2-a8d6bae99891">What the participants in Altman's basic income study say</h2>One recipient in the program, Sarah, is a mother of four from rural Illinois who teaches in a homeschool network and makes just enough from her job to pay for school supplies."I don't really make anything off of it," she said in a testimonial shared by OpenResearch. "Even though my husband had a pretty decent job, we didn't have a lot of money for extras."The payments from the Altman program helped Sarah pay for braces for both of her children, which weren't covered by their insurance, she said. She also used the money to finance a graduation trip for her daughter.But Sarah said she began "slipping into a mindset" in which she was less careful with her finances because it felt as if money was coming in "without having to work for it.""Looking back, I regret that I didn't save more of it," she said.Another recipient, Cara, told the study's researchers that she suffered from a debilitating nerve disorder that caused pain across much of her body and a loss of mobility.While she started to receive some short-term disability payments, she said a break-in to her apartment set her back financially, and she began to sell her personal belongings."Feeling the loss of being able to care for yourself and desperately needing the help of others; it's rough," Cara said.She said she "probably started crying" when she got the phone call saying she would be receiving $1,000 payments from the Altman program. The money helped her pay off nearly all of her debts."It's almost like a miracle," she said. "Knowing that I was able to manage that mountain of medical debt, it felt like my brain would have been in a completely different place."Celene, another participant, told researchers she was forced to move her family in with a friend after losing money in a business venture. She said she was living in squalid conditions.When she received the call that she had been selected for the group receiving $1,000 a month, she was in utter disbelief.She said the money helped her buy new clothes, shoes, and necessities for herself and her children. By the second month, she had landed a job and began saving.The money helped her "not feel like a failure as a parent," she said, and gave her the confidence to make decisions in her family's best interests.Correction: July 22, 2024 — An earlier version of this story misstated when Andrew Yang ran for president. It was in 2020, not 2016.

Sam Altman's basic-income study is out. Here's what it found.

<ul><li><keyword id="6377620" type="General" weightage="20" keywordseo="fixed-deposits" source="Orion">Fixed deposits</keyword> serve as an attractive option for short-term investments too with guaranteed returns. </li><li><keyword id="551306" type="General" weightage="20" keywordseo="arbitrage-funds" source="Orion">Arbitrage funds</keyword> are well-suited for investments with a horizon of one year or less due to their relatively low risk profile.</li><li>Low duration <keyword id="35474" type="General" weightage="20" keywordseo="debt-funds" source="Orion">debt funds</keyword>, which invest in a diversified portfolio of fixed-income securities, are also a viable option.</li></ul>While the purpose of investing is to grow your money, where you invest depends on the time horizon and specific goal. While <keyword id="6391506" type="General" weightage="20" keywordseo="equity" source="Orion">equity</keyword> investments are a great option for long term goals which are at least 5-7 years away, for a shorter duration of one year or less, investing in equity can be risky, as it will be exposed to the vagaries of the market. If you require the amount in a year or less, and do not want to keep your money parked in a savings account, then you need to choose your investments wisely. We take a look. <cmsannotation type="cmsannotation" annotationid="Bank fixed deposits" comment="Subhead" text="Bank fixed deposits">Bank fixed deposits</cmsannotation> Fixed Deposits (FDs) serve as an attractive option for investment of less than one year due to their stability and guaranteed returns. They offer a fixed interest rate, shielding investments from market volatility. With the option of flexible tenures, you can align your FD with your specific financial goals. However, FD returns may be lower than some alternate investment options. While at present, the interest of 211 days to less than one year is 5.75% at State Bank of India (SBI), small finance banks can give an interest of up to 6.50% for a period of less than one year. It is noteworthy that interest earned on FDs is taxed at slab rates. <cmsannotation type="cmsannotation" annotationid="Arbitrage funds" comment="Subhead" text="Arbitrage funds">Arbitrage funds</cmsannotation> Arbitrage funds operate on a unique investment strategy that capitalises on price discrepancies between cash and derivatives markets. They identify opportunities where the underlying securities are bought in the cash market while simultaneously selling equivalent futures or options contracts. The goal is to profit from the convergence of these prices over time. These funds are well-suited for investments with a horizon of less than one year due to their relatively low risk profile. Since they primarily engage in arbitrage opportunities, they are less exposed to market fluctuations and volatility, making them a stable choice for short-term investors. According to Value Research, arbitrage funds have given a category average return of 6.54% in the last one year. Arbitrage funds do not have a credit risk. “They are also tax efficient. For a short period of time the taxation of equities is 15% whereas in debt, individuals have to pay the tax as per their tax bracket where some individuals can pay up to 30% tax,” says Soumya Sarkar, Co-Founder, Wealth Redefine, a mutual fund distribution firm. Arbitrage funds are taxed similarly to equity funds. When held for less than a year, any gains are categorised as short-term capital gains (STCG), subject to a 15% tax rate and thus they are more tax efficient than FDs and debt funds. <cmsannotation type="cmsannotation" annotationid="Debt funds" comment="Subhead" text="Debt funds">Debt funds</cmsannotation> Low duration debt funds are a viable option for investments with a horizon of less than one year. They invest in a diversified portfolio of fixed-income securities such as government bonds, corporate bonds, and money market instruments. These funds maintain a shorter average maturity period, between six months to twelve months (according to SEBI rules), which helps mitigate interest rate risks. They aim to provide investors with stable returns while preserving capital, making them suitable for those with a short investment horizon and a preference for lower risk. “Right now given where the yields are, one could look to get around 6.5% - 7.25% return on low duration funds. Obviously these returns are not guaranteed like a bank FD," says Deepak Gagrani, Founder of MADHUBAN FINVEST, a financial services firm. According to Value Research low duration debt funds have given a return of 6.53% in the last one year. One also needs to understand the tax aspect. “The taxation would be something very similar to a bank FD. It will be based on the tax slab,” says Gagrani. <cmsannotation type="cmsannotation" annotationid="Equity savings fund" comment="subhead" text="Equity savings fund"><keyword id="1554748" type="General" weightage="20" keywordseo="equity-savings" source="Orion">Equity savings</keyword> fund</cmsannotation> <a href="https://www.businessinsider.in/investment/news/benefits-of-equity-savings-fund-offered-returns-and-who-should-opt/articleshow/101210167.cms">Equity savings funds</a>, a hybrid investment option, allocate funds into equity, debt, and arbitrage segments to balance potential returns with risk management. “In equity savings funds the proportion of debt is quite high and equity proportion is low. It has 70-80% in debt and the remaining in equity, so it is a conservative fund,” says Sarkar. With lower volatility compared to pure equity funds, they mitigate market fluctuations, making them a favourable choice for those seeking balanced, relatively stable short-term investments. However, it's crucial to align investments with individual financial goals and risk tolerance for the best results. While the debt portion gives around 6%-7% return, the overall returns go up due to the equity portion. According to Value Research, equity savings funds have given a category average return of 9.14 % in the last one year. In the case of FDs, you can withdraw the funds on the day the FD matures, but in case of the mutual funds mentioned above, it may take one to three business days for the funds to be credited to your account after you submit a redemption request.

Short-term investing: Options to park your money if you have a time horizon of one year or less

<ul><li>Kids should be taught that money is not unlimited, and based on <keyword id="47201" type="General" weightage="20" keywordseo="income" source="Orion">income</keyword> one has to prioritise the spends. </li><li>If a kid asks for multiple things, they need to prioritise items. </li><li>Parents can open a kids’ bank account and start parking the amount they receive.</li></ul>When six-year old Dwita Das used to go and play in the garden about a couple of years ago, she would ask her mom for candies. Her mom would give her five rupees and the shopkeeper would lay down the different options she had- candy and gold coin chocolate, which were the only things that were available for five rupees. Dwita would be happy with that, but when she asked her mom for chocolate that cost ₹10 or ₹20, her mom told her that she could have it, if she saved the money for two or four days. For her, this was the first initiation to the fact that you need money to buy things, you cannot buy something if you do not have enough money and most importantly, if you want something bigger or better, you need to ‘save up’. Parents need to inculcate <keyword id="19641702" type="General" weightage="20" keywordseo="money-concepts" source="Orion">money concepts</keyword> in their kids when they are young, as soon as they learn about numbers in school. <cmsannotation type="cmsannotation" annotationid="Money is limited, so is what you can buy" comment="Subhead" text="Money is limited, so is what you can buy">Money is limited, so is what you can buy</cmsannotation> Kids who grow up in an atmosphere of abundance should learn that money is a finite resource. Delhi-based Gulshan Singh (name changed), father of two daughters, 9 and 14 years old, says that kids are different. Some kids may demand that he or she wants money or a toy all the time, and in that case it becomes important to educate them about the value of money and that money is not unlimited. Until she was about four, four and a half years old, Dwita did not understand that money was limited. She thought that you can get money by walking into a bank and then buy whatever you want. Slowly her parents told her that earning money was difficult and since certain things were very expensive, they were not going to buy her everything she wanted. There used to be a lot of coins lying around the house and when she asked what they were, she was told the difference between 1, 2, 5 and 10 rupee coins and that you could get such and such things with that. That is when her mother started to take her to the shop. “One can teach their kids how they earn money and then how they spend it. This way the kids would understand that money is not unlimited and based on income one has to prioritise the spends,” says Abhishek Kumar, founder and chief investment advisor at SahajMoney, a financial planning firm <cmsannotation type="cmsannotation" annotationid="It is important to plan how to spend your savings" comment="Subhead" text="It is important to plan how to spend your savings">It is important to plan how to spend your <keyword id="25450" type="General" weightage="20" keywordseo="savings" source="Orion">savings</keyword></cmsannotation> When nine-year old Ankush (name changed) was 5 years old, his mother bought him a ₹5 chips packet everyday when he went out to play. Since that became a habit and since chips everyday were not healthy, his mom decided to give him ₹20 every week and keep the money with her. Now, he could have chips only four days a week. Every time he would spend ₹5, his mother reminded him how much was left and how many days he would have to wait till he got ₹20 again. Now that his money was limited, not only did Ankush not have chips everyday, he cut down from the chips to a one rupee candy, so that he could buy something everyday and his money would not get over too. When Singh visits a mall, his younger daughter will walk into Hamleys, like a soft toy and want to buy it. Let us say that the toy costs ₹1,000. Singh would then explain to her that if she did not buy the toy at Hamleys she could buy a similar toy at a local store for ₹300, one book and also have icecream with the same money. What would she prefer to do? Would she like to spend ₹1,000 in one shop or at four or five places. It was her choice, but such a lesson would teach her how to plan, how to spend money, and also to think through before she wanted to make an impulsive purchase, something many adults fail to do. “If a kid asks for multiple things, tell them that there is a budgeted amount to spend and she has to prioritise which item she would like to spend it on,” says Kumar. <cmsannotation type="cmsannotation" annotationid="Piggy bank: A child’s first tryst with savings" comment="Subhead" text="Piggy bank: A child’s first tryst with savings"><keyword id="91643" type="General" weightage="20" keywordseo="piggy-bank" source="Orion">Piggy bank</keyword>: A child’s first tryst with savings</cmsannotation> Piggy banks are like fun money mentors for kids! They're cute and they help children learn to save. You put coins or notes inside, and they show how saving little by little can become a lot. It's like a cool game where you watch your money grow, especially if they are transparent. They teach about spending wisely and waiting for things you really want. Piggy banks make learning about money super fun. During the pandemic, Ankush would not go out and he used to save the ₹20 he received every week. Also during the pandemic, a lot of people who came to their house would give him cash gifts. He was encouraged to put all his money in a piggy bank. After a couple of years of such deposits, he had a good ₹3,000 odd which his father deposited in the post office. Ankush had started off on his savings journey at a very early age! Parents can open a kids’ bank account and start parking the amount they receive as gifts in that account and show them their money grows if they delay their spending. Dwita and her parents are going on a trip to Japan in February. Dwita has a long list of things she wants to buy- a kimono, Hello Kitty toys, Studio Ghibli toys and so on. So her parents gave her a piggy bank , where she can collect all the money she gets from her mom and from her monetary gifts, especially from her grandparents. She can also get ₹10 for cleaning her room everyday and also with helping her mom with chores. Her mom has told her that when she goes to Japan, she can buy her toys from the money she has saved up in her piggy bank. When the other day she asked for ₹50 bucks to do her homework, her mom had to explain to her that that was a part of her education and she could not get paid for it! While parents can teach their kids money concepts and make them understand the value of money, it is equally important to set the right example. If the parents are blowing away money in buying luxury items and throwing lavish parties, the kid may think that is the right way and worse, feel entitled. Like anything else, a strong foundation of what money means and how it works will set your kids up for a future where they know how to value money and to enjoy it.

It is never too early to introduce kids to money concepts

<ul class="summary-list"><li>Some older Americans are sacrificing their life savings to pay for medical treatment.</li><li>It means they can't retire and are struggling to pay their bills or afford groceries.</li></ul>Kimberly Mullen, 61, is couch surfing.She drained her bank accounts paying out of pocket for <a target="_blank" class="" href="https://www.businessinsider.com/4-surprising-medical-costs-how-to-avoid-2023-4">cancer treatments</a> for two years, waiting for <a target="_blank" class="" href="https://www.businessinsider.com/poverty-line-leaves-behind-low-income-americans-snap-medicare-wic-2024-6">Medicare</a> to kick in. Plus, her mother had cancer at the same time."She didn't survive, but I did," Mullen said. "But it cost us our home and all of our life savings and everything — I'd say right around $400,000 between the two of us."Mullen now makes <a target="_blank" class="" href="https://www.businessinsider.com/jobs-labor-market-federal-minimum-wage-raise-small-business-2024-8">$10 an hour</a> cooking part-time at a truck stop in rural Kentucky. She drove trucks for 38 years before her diagnosis and would like to get back on the road, but she'll have to pay for more training. She can't afford a home, and she needs a local address to qualify for affordable housing. She's worried she'll have to work until the <a target="_blank" class="" href="https://www.businessinsider.com/retirement-crisis-social-security-pensions-student-loan-debt-2024-3">day she dies</a>.It's a story all too familiar for <a target="_blank" class="" href="https://www.businessinsider.com/boomer-retirement-social-security-insurance-cancer-diagnosis-2024-7">some older Americans</a>: An unexpected health crisis derails their retirement planning. With insufficient help from health insurance or Social Security, medical bills eat up any savings or income they have."People who are very wealthy, their savings are basically self-insurance," Nancy Altman, the president of advocacy group Social Security Works, told Business Insider. "Healthcare costs in this country are higher than anywhere else in the world, and we pay more for healthcare."Americans over 65 often have two options for health insurance: private market or Medicare. The former is too expensive for many, and the latter can come with high out-of-pocket costs.It's another example of how the retirement crisis is playing out among America's older residents — and a sobering warning for younger workers as retirement savings gaps widen and <a target="_blank" href="https://www.businessinsider.com/rise-in-cancer-among-young-people-under-age-50-charts-2024-3">cancer rates rise</a>.<div type="image" title="A collection of pills on a kitchen sink" height="1601" width="2400" msid="113365910" hostid="261" sizebytes="296448"></div>The American Cancer Society estimates over 2 million new cancer diagnoses and about 600,000 cancer deaths this year in the US, though the cancer mortality rate has fallen since 1991. About 40% of people with a cancer diagnosis deplete their life savings within the first two years, while cancer survivors are 2.7 times more likely to file bankruptcy. This particularly impacts older adults, who are more prone to many cancers and are often ineligible for clinical trials.Plus, Dr. Karen Knudsen, CEO of the American Cancer Society, told BI that financial limitations can hamstring a patient's recovery. "What is very common is either skipping doses for cancer therapy or halving their doses so they can extend the time which their current prescription will allow them to stay on the drug or therapy."Dozens of older Americans told BI in recent months that their <a target="_blank" class="" href="https://www.businessinsider.com/retirement-savings-social-security-baby-boomers-without-savings-401k-poverty-2024-8">Social Security and pensions</a> aren't enough to get by without working. Some said they have to rely only on Social Security due to health issues, while others said they've taken jobs at Walmart, a hospital, or with Uber to supplement government assistance.For this story, BI spoke to 10 older Americans with health issues. Most of them said they're scraping by due in part to high medical costs. Many have sacrificed vacations, home repairs, or even medical appointments to make ends meet."It could happen to anybody overnight," Mullen said. "Your life could be turned upside down in a split second because you never know if you're going to get sick or you're going to get hurt."<h2 id="63019a77-b62f-410c-bf98-e7708cfc85dc">Medicare doesn't cover it all</h2><div type="image" title="A woman aids her husband by applying a bandange" height="1601" width="2400" msid="113365912" hostid="261" sizebytes="192696"></div>Wendy Jones, 71, is a mother of four who has dealt with various forms of cancer since 2005. For over a decade, she was the family's breadwinner, earning between $70,000 and $90,000 yearly as a paralegal while being a caretaker to her husband, who was injured in 1992 in a workplace accident.When she was diagnosed, finances became a major struggle. Even with insurance, medical payments were hundreds of thousands of dollars each month. Surgeries, ambulance costs, medications, and other emergency expenses have eaten away at their 401(k)s and savings. Recently, they lost their Medicare Part B — she suspects it's because she put money her mom gave her into a savings account, putting her assets over the eligibility threshold. Now she's struggling to afford groceries and essentials.Jones, who gets $2,200 a month in Social Security, has had to take on part-time work, which made her ineligible for some federal assistance."It's a catch-22: People say, just get a job, but I tried that, and everything else was taken away from me," Jones said, noting she will work as long as she can drive, walk, and answer phones. "I didn't get ahead. I wasn't able to save or progress in any way whatsoever."Retirement expert and researcher Teresa Ghilarducci, who chairs the economics department at the New School for Social Research and directs the Schwartz Center for Economic Policy Analysis, said that Medicare is leaving retirees who aren't in poverty but still aren't staying afloat in a tight bind."If you are in the top 10%, your own wealth can take care of those long-term care needs, but it's the middle that is having to go without the care they need or exhausting all forms of wealth or home equity or going into debt to pay for it," Ghilarducci said.An <a target="_blank" href="https://www.kff.org/medicare/issue-brief/medicare-households-spend-more-on-health-care-than-other-households/">analysis</a> from the Kaiser Family Foundation found that, in 2022, Medicare households spent $7,000 on healthcare; non-Medicare households spent just $4,900. Healthcare spending also made up a greater share of Medicare households' spending.That was the case for Rebecca Buffum, 74.Buffum, who works in healthcare, had expected retirement to be a smooth, easy transition. But a cancer diagnosis and multiple years of treatment bulldozed through those plans.She paid for chemo out of pocket, spending her way through her retirement savings and maxing out her credit cards. She racked up what she estimated was around a million dollars in medical bills and ended up declaring bankruptcy.Though she's in remission, she'll have to keep working. Her Social Security covers her mortgage and not much else."I am blessed that, number one, I'm still alive, and number two, that I have the capacity to work," she said. "It's a double-edged sword."<div type="image" title="Rebecca Buffum takes a moment to reflect." height="1600" width="2400" msid="113365906" hostid="261" sizebytes="90784"></div><h2 id="466afe2c-413a-43ac-ac0e-c84fdbdc0379">Making sacrifices and setting a strict grocery budget</h2>Health issues lead some older Americans to skip medical appointments, sacrifice the quality of their diets, and quit their jobs entirely. It means that their illnesses are taking more than their health — the fabric of their lives is changed entirely, leaving many lonely and without the creature comforts that can make life enjoyable.That's a far cry from the vision of retirement many had — and it shows the very real impact of the cracks that some of America's seniors fall into. They might spend their lives living middle-class, only to slide into poverty in their old age.When Marion, 70, quit her job in restaurant management due to health issues, she cashed out her 401(k) early and moved in with her sister and her sister's boyfriend to save money.To supplement the $1,200 in disability she received a month, she started cleaning houses and selling her art.Like many baby boomers BI spoke with, Marion cut back on discretionary spending like vacations, dining out, cosmetic treatments, and new clothes purchases. Others have drastically reduced spending on necessities like healthy food.Robert Papalia, 74, has capped grocery spending for himself and his wife at under $100 a week, rotating through 30 credit cards to afford all their health and housing repair bills. He retired early in 2010 because of his wife's health issues, living on his company's pension and Social Security but struggling to afford medical bills and high property taxes."Do we have money in the bank? Yes. Is it a lot of money? No," Papalia said. "I look at my wallet at the end of the day, and it's a difference between night and day."Leonard Bianconi, 67, can't afford to go out to eat or buy many groceries on his SNAP benefits, so he relies on food pantries. He finds fruits and vegetables often on the precipice of going bad — a major challenge for Bianconi, who's diabetic and needs a fresh diet."Right now, I have no extra money to do anything. My life is pretty lonely. I don't have any money to go anywhere. I can't really do things. Even going to the cinema would be difficult," Bianconi said.<h2 id="299e0d51-1dc1-4501-bd31-4b0cf5476ce9">Feeling grateful and clinging to hope</h2><div type="image" title="Wendy Jones smiles at her husband while he sits on the bed" height="1601" width="2400" msid="113365904" hostid="261" sizebytes="324060"></div>Many of the older Americans who spoke to BI said they're remaining as positive as they can about their futures, with some expecting their conditions to improve.In fact, Gallup found three in four retired Americans think they have enough to live comfortably, even though 45% of non-retirees anticipated coming up short by the time they retire. About 58% of retired Americans noted Social Security is a "major source" of income in their retirement, compared to the 35% of non-retirees who expect Social Security to be a large portion.Monique Morrissey, a senior economist at the left-leaning Economic Policy Institute, said that while more ambitious proposals to reform long-term care haven't passed, the Biden-Harris administration has still <a target="_blank" class="" href="https://businessinsider.com/medicare-drug-price-negotiations-part-d-biden-pharmaceutical-companies-2023-10">made a dent</a> in other pressing issues."In a much more limited way, they have done a lot," Morrissey said, pointing to the administration's success in <a target="_blank" class="" href="https://www.businessinsider.com/bidens-state-of-the-union-abortion-access-prescription-drug-cost-2024-3">lowering prescription drug costs</a>. "There are some things that they've sort of been patching when they can, when they can get Republicans to go along with it, but there are other big gaps in our patchwork system that still need to be addressed."Frank Amend, 63, was working as an engineer and marketing manager when he experienced chest pain two decades ago. Weeks later, he underwent a heart catheterization procedure, followed three years later by a triple bypass.His insurance covered most of his expenses, though he still took a hit. He recovered fast, and he returned to work in 2006. He said he "works for my healthcare" and acknowledged he's "one of the fortunate ones who can retire at 65."Amend recalled standing behind a man who broke down in tears at the pharmacy when he heard his wife's prescriptions would cost $700. From that moment, he knew he wanted to get involved in advocacy work, collaborating with the American Heart Association to assist survivors struggling with medical bills. He helped pass a bill in North Carolina banning smoking in all bars and restaurants, and he's spoken at presidential healthcare task force meetings.Amend said it's crucial for older Americans to believe everything will be OK, noting "your mindset perpetuates what your outcome will be." Still, he said he's playing a small but important part in working toward healthcare equality, given many medications still charge sky-high prices and many Americans are uninsured."The people working two or three jobs to try to put a roof over their family's head and food on the table, they can't afford healthcare," Amend said. "Thank God for Obamacare, but in some cases, it just doesn't cover it."<div type="image" title="Roy speaks to his pet African Gray" height="1800" width="2400" msid="113365915" hostid="261" sizebytes="490476"></div>

You Searched For "basic savings bank deposit accounts" and got 12 results

Simply Put: A Deposit Dilemma — What's the fuss about a crisis in Indian bank deposits? Are mutual fund investments to blame?

Ira Alok Puranik

A Deposit Dilemma — What's the fuss about a crisis in Indian bank deposits? Are mutual fund investments to blame?

Ira Alok Puranik

Decline in bank deposits because of non-uniform tax treatment on various investment options: SBI report

ANI

The interest rate on my high-yield savings account keeps dropping. I asked 3 experts how to earn more on my cash.

Christine Ji

Discouraging retail play in F&O may help banks garner deposits: SBI Chairman

PTI

Household savings are choosing mutual funds over banks to invest savings: RBI Governor

ANI

4 trends to watch this bank earnings season

Kaja Whitehouse

RBI slaps fine of Rs 2.91 crore on Axis Bank and HDFC Bank: All details

BI India Bureau

Sam Altman's basic-income study is out. Here's what it found.

Noah Sheidlower,Kenneth Nieme…

Short-term investing: Options to park your money if you have a time horizon of one year or less

Anagh Pal

It is never too early to introduce kids to money concepts

Anagh Pal

Some baby boomers are burning through their retirement savings to pay for cancer treatments. Then they have to go back to work.

Juliana Kaplan,Noah Sheidlower

Popular Keywords

Buying Guides