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Is government savings schemes better than bank deposits?

Created by : Deepa Gawade, Analyst, ANZ Banking  | 03 26 2010 07:12:41 +0000
Industry : BankingFunctional Area : Equities(Markets)
Keywords : deposits saving schemes fdis government saving schemes bank deposits
Activity:  139 views;  last activity : 07 06 2010 20:18:09 +0000

These days, more and more individual savers are preferring the government’s small savings schemes over bank deposits, a trend that could make it difficult for banks to meet their business targets. According to projections made by the central bank in the October monetary policy, bank loans would grow 16% while deposits would rise 18% during the current fiscal. For this to happen, banks will have to lend almost Rs 130,000 crore by March, and mop up Rs 161,000-crore deposits.

Also, there has been a conscious effort by many banks to slow down deposits mobilisation with loans failing to pick up. Banks have not aggressively pushed for deposits this year because of a slowdown in credit offtake. At the same time, there is a shift towards small savings scheme. But from the macro point of view, there may not be an impact on the overall savings rate.

In this condition, do you think government saving schemes are better than bank deposits? share your views on this.

  
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Depositors in Banks indirectly help the Government, as their money is loaned to development schemes. As time passes, the value of the money decreases and income tax is deducted from the interest. So, the Depositor ultimately becomes a Loser, though he had helped the Government. Thats why I think government savings schemes are better than bank deposits.
By Deepa Gawade, Analyst, ANZ Banking  | 03 26 2010 07:30:20 +0000
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