BS Opinion: Fixed Deposits vs. Debt Mutual Funds in Today's Market
BS Opinion on Fixed Deposits
In the current financial landscape, fixed deposits are gaining traction as a preferred investment option over debt mutual funds. Union Finance Minister Nirmala Sitharaman recently urged public-sector banks to enhance their focus on mobilizing deposits. With deposits trailing behind loan growth, the industry's need for a steady influx of capital has never been clearer.
The Current State of Bank Deposits
Data shows that as of July-end, deposits experienced a growth of only 10.6% year-on-year, compared to a robust 13.7% increase in loans. This discrepancy raises concerns about the sustainability of current banking practices, especially when low-cost current and savings accounts (CASA) have declined from 43% of total deposits last year to 39% in the current financial year.
Importance of Smaller Deposits
Nirmala Sitharaman emphasized the need for banks to target smaller deposits, which, despite coming in trickles, represent the bread and butter of the banking system. This strategic shift towards raising greater household deposits could reshape the mutual fund industry, showcasing the importance of cash stability versus the volatility often seen in market-linked options.
This article was prepared using information from open sources in accordance with the principles of Ethical Policy. The editorial team is not responsible for absolute accuracy, as it relies on data from the sources referenced.