India Shining to India Whining?

[malikdeepak1]

Bhai donu jaa liye.. Er je 8% e interest lena se to apna PPF khulwa lyo. Kam te kam interest ke upar tax to naa laagega.
Er ye MF totally market dependent hove se. Je kise ne mahnge khreed liye ar market lot gya to sari umar batt dekhe jao ak upraan sarkenge, eeb sarke, ye sarke..

 

[ssgoyat]

FD infact has another con attached to it. In India, you need to pay tax on the interest earned through FD!

Correction:

The biggest drawback is the 5 years lock in period to gain tax benifits (also upto 1 Lacs of FD amount only, i suppose).
If the total interest earned on all your fixed deposits in a bank is greater than Rs. 10,000 in a financial year, you are liable for TDS and the banks will deduct the income tax at source.

Moreover, banks will impose a penalty if you break your fixed deposit before the maturity period. Make sure you get the facts right about this thing. How the bank calculates this penalty and what all charges will it levy when you break a fixed deposit should be noted carefully.

Also, Rising inflation can wipe out the interest benefits.The actual benefits or income from fixed deposit can be annulled by a rising inflation. Effective yield would drop.


But i see it as a safe bet for Retirees, who rather have a decent amount to put in FD, than parking idle in savings bank account, with has otherwise a low return.
Fixed deposits earn fixed interest rates for their entire tenure, which is usually compounded quarterly. So, those who want an income on a regular basis can invest into fixed deposits and use the interest rate as their income. This makes a fixed deposit very popular way of investing money for retirees.

 

[virj]

FD has its own beniftis too.

You have to be smart enough to exercise this option. If, say, interest rates are quite high then you lock in the good rate through FD so you get benifitted by the downward fluctuation in interest rate. Bank would be happy if you break FD this time and shouldnt charge you anything ( I have no personal experience of this but common sense says they shouldnt if they do they are fool). You also dont want that as you can borrow at a cheaper rate somewhere else. If the market is not in your favour and you break the FD then you have to pay for the bank loss. Its like a fixed rate interest loan. You may get benifitted through this or may not. However sometime its a gamble worth talking.

FD is like contract if used wisely is good otherwise bad. Also interest earned through FD get taxed almost everywhere unless a clause (or other section) allow otherwise.


Inflation affect all income same way and by same percentage, I guess.

FD is a Risk free (almost) fixed income. The more the risk is the more is the income (and loss)

 

[arvindc]

FD has its own beniftis too.

You have to be smart enough to exercise this option. If, say, interest rates are quite high then you lock in the good rate through FD so you get benifitted by the downward fluctuation in interest rate. Bank would be happy if you break FD this time and shouldnt charge you anything ( I have no personal experience of this but common sense says they shouldnt if they do they are fool). You also dont want that as you can borrow at a cheaper rate somewhere else. If the market is not in your favour and you break the FD then you have to pay for the bank loss. Its like a fixed rate interest loan. You may get benifitted through this or may not. However sometime its a gamble worth talking.

FD is like contract if used wisely is good otherwise bad. Also interest earned through FD get taxed almost everywhere unless a clause (or other section) allow otherwise.


Inflation affect all income same way and by same percentage, I guess.

FD is a Risk free (almost) fixed income. The more the risk is the more is the income (and loss)

There are talks going on to remove this lock in of FD. It would be linked to the interest rates of government securities and thus would vary as per market conditions.
The aim of the move is to move retail people away from the comfort zone of FD into the market. (...where financial institutes can beat them with their money and specialization power .. )

 

[virj]

Are you telling me that interest rate on FD will vary (in other words would be uncertain) in near future?

And you wont be sure what will you get in 5 years time in return?

 

[arvindc]

Are you telling me that interest rate on FD will vary (in other words would be uncertain) in near future?

And you wont be sure what will you get in 5 years time in return?

Read this somewhere recently. It 'may' or 'may not' happen. If it does, then I think it is likely to take time for implementation, just like the removal of housing loan exemption. Government would not want another controversy at this point of time.

 

[virj]

This doesnt make any sense to me that the rates in term deposit/fixed deposit will fluctuate . So you increase the risk for what, nothing? Housing loan exemption has nothing to do with Interest rate offered for a FD.

 

[vicky84]

Businesses are not happy with Indian government policies and no longer interested in Indian market.

http://timesofindia.indiatimes.com/...-shift-base-overseas/articleshow/11114890.cms

Excerpt from the above article:

The reasons are mainly two-fold: the policy paralysis brought on by a politically weak and scam-struck government, compounded by obstructionist competitive politics; and the climate of fear that has spread because of the raids on and arrests of businessmen. They have a third, more specific grouse (not that it's new): the time and hassle it takes to get environmental clearance and acquire land.

Bulge-bracket businessmen - from telecom and textiles to aviation and steel to real estate and minerals - are talking 'Quit India', but obviously not in public.

"We are looking for the red carpet, not for red tape."

 

[arvindc]

This doesnt make any sense to me that the rates in term deposit/fixed deposit will fluctuate . So you increase the risk for what, nothing? Housing loan exemption has nothing to do with Interest rate offered for a FD.

There are already such FD Products in market.

The bank actually decouple themselves with the risk. And this can be a win-win situation for both, the bank and customers. Example, a person gives money to bank for FD at Base-X rate, the bank in turn gives the money as a home loan to someone else at Base+Y rate.

 

[virj]

There are already such FD Products in market. .

Can you give an example of such product and bank offering this? Would be intersting to see who is buying them. FD with a fixed term but uncertain interest rate!

 

[arvindc]

Sbi.............................

It makes lot of sense in a rising interest rate period. At any other time, it saves one from anticipation on the interest rates.
.. Term Deposit would be a better term for this.

Links: 1) http://www.business-standard.com/india/news/whatfloating-rate-term-deposits/436657/
2) http://www.hindustantimes.com/News-...t-rates-to-woo-investors/Article1-660865.aspx

 

[virj]

Thanks for the info. So you were talking about a new financial product. I thought you were saying now in FD you cannot lock the rate . The product you are refering to is just another option a riskier option not replacement as per my understanding, isnt it?

 

[arvindc]

Thanks for the info. So you were talking about a new financial product. I thought you were saying now in FD you cannot lock the rate . The product you are refering to is just another option a riskier option not replacement as per my understanding, isnt it?

There are talks going on that it may completely replace the 'fixed rate' FD, but nothing has been finalized yet. So no worries for your current and near future FDs.
Just like most home loans are now on floating basis, banks may switch to floating FD as well.

For me it makes better sense as dealing with uncertainties is not the core business of banks. That is a subject matter of insurance companies.

But don't worry, as of now everything remains same for FDs.

 

[annch]

A question on China:

I was reading that China and India follow similar currency control practices. Is it just the bigger volume of China's economy that makes it stronger in the global economy?

 

[anilsangwan]

Floating interest rate products are probably new to India but banks like ICICI have been offering these to NRIs. Ek mahine ke liye USD10000 deposit karo, they will give you 8% interest but will convert your deposit into INR or will pay back in USD itself --- this will depend on the USD/INR rate that time as compared to Strike Proce agreed earlier at the time of deposit. Such products are probably called "Structured Deposits". ( Baaki gyaani bhai correct kar diyo menne agar galat ho meri understanding to). In such kind of deposits or products - the return depends on underlying benchmark - which can be Interest Rates like LIBOR or Prices of a security or exchange rate between two currencies and so on.


There are many more "deadly" combination of underlyings and investor may end up losing his investment amount itself...

Marwaaogey tham kise retired foujji ne. Pension tein e gujaara kar lenn dyo.... :angel:

 

[vpannu]

घणे चातर सो भाई | एक आध ते किराड़ा ने भी माफ़ करे से | :victorious: नोट ते नोट कमाना तो कोए थारे ते सीखे :livid:

 

[virj]

There are talks going on that it may completely replace the 'fixed rate' FD, but nothing has been finalized yet. So no worries for your current and near future FDs.
Just like most home loans are now on floating basis, banks may switch to floating FD as well.

For me it makes better sense as dealing with uncertainties is not the core business of banks. That is a subject matter of insurance companies.

But don't worry, as of now everything remains same for FDs.

They are 2 different product. One is used as a less risky investment, a good option for retired people who cannot afford to lose the money the other is good for younger people who take more risks.

One cannot replace the other. World wide banks have been offering both. You are saying that uncertainities is not the core business of banks but FD is more certain where as floating rate is more uncertain. In floating the risk is high and hence the reward. I dont personally invest in Fixed rate deposits or Govt bonds. I think these are things for old people, a safer option.

In home loan too you have two option Fixed rate loan and variable rate. They are 2 different product and the decision will depend on you guess : Will the future interest rate will drop or rise? You may relatively lose money in both but variable is more risky that why its offered at a lower rate than fixed.

 

[virj]

A question on China:

I was reading that China and India follow similar currency control practices. Is it just the bigger volume of China's economy that makes it stronger in the global economy?

Similar but not same. China has official peg india control through RBI by active trading in USD/Rs.

 

[kapdal]

A question on China:

I was reading that China and India follow similar currency control practices. Is it just the bigger volume of China's economy that makes it stronger in the global economy?

India and China both intervene in the currency markets but the kind of intervention is quite different. China follows a fixed peg to USD system. The govt. decides the rate and allows it to move in a very limited band. It also means that China is prepared to buy and hold foreign currencies (and sell Renminbi) in unlimited amounts. It keeps the Renminbi weak which means that when Chinese exports are converted into foreign currencies, they are much cheaper than goods from other countries. It also means that China has to pay more for its imports, but as long as it exports more than it imports (which it does), it gains from this practise. Many economists feel that it is this currency manipulation at a massive scale that gives China its competitive advantage. It has become the factory of the world because of this huge cost advantage that is sustained by rigging its currency. In the long run though, it is only lending massive amounts to foreign governments. If they refuse to pay China back or more likely, their currencies fall- worth of Chinese assets would fall. If it starts offloading such vast amounts of foreign assets, its currency will have to appreciate.

Rupee moves quite a lot in comparison. RBI does intervene frequently in the name of "stabilisation", but there is no official target. As such, India is not a manufacturing hub like China where cost advantage is most important and so India doesn't gain that much by depreciating Rupee a lot. On the contrary, since we are big importers of oil, a weak currency hurts us.

 

[vicky84]

Rupee moves quite a lot in comparison. RBI does intervene frequently in the name of "stabilisation", but there is no official target. As such, India is not a manufacturing hub like China where cost advantage is most important and so India doesn't gain that much by depreciating Rupee a lot. On the contrary, since we are big importers of oil, a weak currency hurts us.

Kapil,

Alike China, India is software services and BPO hub and cost of doing business matters a lot. In that case strong rupee can hurt the export services! Last week, Infosys shares shoot up after a weaker rupee news whereas shares of other companies like Reliance plummeted.