Archive for June 15th, 2009

Small savings in demand again !!



Schemes Like NSC, Bonds Attract Investors As Deposit Rates Of Banks, Cos Fall

With bank and corporate deposit rates falling, investors are ‘‘rediscovering’’ an alternative avenue to park their funds.:)

According to investment consultants, people are once again showing interest in government backed small saving schemes like National Savings Certificate, Kisan Vikas Patra and Government of India bonds, among other things.

There is also a clamour among retired people to invest in the government-sponsored Senior Citizen Saving Scheme.

Investors are also forced to look into these schemes as corporate deposits, which paid better than bank deposits, have either had their interest rates slashed or companies have stopped accepting deposits altogether.

Banks paid interest rates as high as 10.5% till recently. However, they have begun reducing rates after liquidity improved dramatically in the banking system.

Most banks offer around 7-8% interest on fixed deposit these days. Some companies too used to offer higher rates of around 11-12%.

Some experts also points out that the ‘‘newfound favour’’ for safer or preferably government-backed returns also could be the reason for the renewed investor demand for small saving schemes.

There was some kind of anxiety about the safety of one’s money till recently because of the uncertainties in the global economy. The sentiment has improved marginally after the stock market started showing signs of revival.

However, some people, especially retirees, are still concerned about the safety of their money. That is why they prefer government schemes like government of India bonds and Senior Citizen’s Savings Scheme.

The Senior Citizen’s Savings Scheme particularly appeals to retirees as it offers a higher interest of 9%.

The scheme was launched by the government in 2004 because retirees were complaining about lower rates on bank fixed deposits. It is now once again in favour because it offers 9% interest.

And it seems investors will have to be happy with these small saving schemes for some time, as experts don’t think banks or companies are likely to up rates anytime soon. 🙂
Source : TNN