Saving for the rainy day?

Here are 5 top

saving options

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Investment options?

BankBazaar.com, On Thursday 23 December 2010, 10:59 AM

The interest rates are rising. It is good news for some - those who look at making deposits; bad
news for some - those who are looking at taking loans. Savings however have to be channeled
carefully so that the maximum can be gained from the deposits. Here are the top 5 savings
instruments in a rising interest rate regime.

In today's scenario the top 5 savings instruments are:

1. Debt Mutual Funds

2. Mutual Fund Monthly Income Plan - Growth Option
3. Company Deposits
4. Post Office Recurring Deposit
5. Post Office Monthly Income Scheme

Debt Mutual Funds

These are managed funds that invest the funds from the investors predominantly in debt and debt

Company Deposits

Companies that offer deposit schemes to consumers tend to offer rates that are in-between bank
deposit rates and bank lending rates. This is a win-win situation for the company and the person
saving.

The bank has to make a profit when borrowing from the public and lending to companies. So
they have an interest rate difference (spread) of about 4.5%. In effect, the deposit holders are
paid less and the borrowers are charged more. When a company has direct access to the
depositor, both benefit. The depositor gets a better rate than what the bank can offer and the
company is able to borrow at a lesser rate when compared to a bank interest rate.

However, it is in the best interest of the borrower to do his research thoroughly and double check
how good the credit rating of the company is before investing. On an average estimates show
that  one can easily get 11% - 12% on reputed companies' deposits for a 3 year term.

The returns will be taxed as interest and will have TDS.

Also Read:

Incomes that are not taxed

Last minute tax planning? Here is a quick guide!

How to reduce tax when selling shares

Post Office Recurring Deposit

This is a 5 year scheme where one invests on a monthly basis. However, there does exist an
option for the fund to be closed after 3 years, which comes with a penalty of 1%. The advantage
with the postal recurring deposit over the bank recurring deposit is that the minimum monthly
investment is only Rs.10/- with no upper limit. In case the payment is made once is 6 months or
on a yearly basis, there are discounts for that too.

The limitation is that the interest rate is fixed at 7.5% only and auto-debit to bank account is not
available.

There are no tax benefits from the scheme. However Post Offices have not been deducting TDS.

Post Office Monthly Income Scheme

For the retired people, the Post Office Monthly Income Scheme is a good savings instrument.
The interest is 8% divided on a monthly payout basis. The payout if not required can be
channeled to a recurring deposit. The effective returns increases by almost 10% by doing this.
The interest can be credited to a savings account of any bank too. The account can be closed
after 1 year with a 5% penalty and after 3 years without any penalty. The limitation however is
that the maximum investment for any individual is only Rs.6 L.

The ranking of the above 5 savings schemes have been done based on their returns, the
convenience factor to close and change to another savings scheme (important when the interest
rate is rising) and the safety for investments. Of all the options the debt mutual funds appear to
score the highest due to their flexibility and returns. This is closely followed by the mutual fund
MIPs.

MUMBAI: Punjab & Sind Bank made a smart debut on the bourses today, listing at a
premium of nearly 22 per cent over its issue price of Rs 120 on the BSE.

Shares of the state-run lender opened at Rs 146.10, up 21.75 per cent vis-a-vis their issue price,
on the Bombay Stock Exchange.

The scrip witnessed a similar debut on the National Stock Exchange and opened at Rs 144,
translating into a premium of 20 per cent over the issue price.

At 11:18 AM, the stock was up 9.42% at Rs 131.25 on BSE and 10.21% at Rs 132.25 on NSE.

The bank had fixed the issue price of shares under its recent initial public offer (IPO) at Rs 120
apiece -- the upper end of the price band of Rs 113-120 a share.

Punjab & Sind Bank raised nearly Rs 480 crore through the initial public offer (IPO), which was
subscribed 50.75 times.

The bank will use the IPO proceeds to finance its business expansion plans. The funds raised
from the IPO will also take care of the bank's credit growth needs over the next two to three
years.

Till today, Punjab & Sind Bank was the sole unlisted nationalised bank out of the 19 in the
country.

The bank received good response from the investors and the issue was subscribed 50.75 times.
QIB portion was subscribed 49.80 times, non-institutional investors showed immense interest in
the issue and their portion was subscribed 85.84 times while retail investors quota was
subscribed 44.45 times.

SBI capital markets limited, Enam securities private limited and ICICI securities limited were the
leading book running managers to the issue.

MUMBAI: The Citibank employee who perpetrated the Rs 400-crore fraud not only duped a
string of wealthy individuals, but also took one of India’s biggest business groups for a ride.

A few firms belonging to Munjal-controlled Hero group are learnt to have invested close to Rs
200 crore in the sham investment scheme that promised a high rate of return.

A senior Hero group official used his discretion to invest the money in what initially appeared to
be a normal treasury operation done to deploy surplus cash. The money collected from the Hero
group entities and others was used to buy stocks by routing funds through multiple bank
accounts and several trading and demat accounts with three brokerages.

There is no evidence at this stage to suggest the Hero group official was acting in connivance
with Shivaraj Puri, the disgraced Citibanker who devised the fraudulent scheme.

“Citibank officials are in touch with Hero group. They are discussing the matter ever since the
bank sensed the fraud,” said a person familiar with the ongoing investigation. The investment,
according to the person, was not by the flagship Hero Honda , but by entities that were holding
investible surplus belonging to group promoters.

Hero group officials were not available for comment while an email to Sunil Kant Munjal,
promoter-director of India’s largest two-wheeler maker, Hero Honda, went unanswered. A
Citibank spokesperson also declined comment.

The police has issued a ‘lookout’ notice alerting airports to track Puri, who is currently
absconding, and other suspects involved in the fraud. However, according to sources, Puri will
present himself before tha court on Friday.

What has come as a surprise to banking circles is the blatant nature of the fraud that began with
Puri forging a Sebi document that named a Citibank account as the custodian account for a
scheme that indicated lucrative returns. An account was opened in the name of one Premnath,
who was later found to be a relative of Puri who worked as a relationship manager with the
Gurgaon branch.

In the first leg of the transaction, investors put money in the scheme favouring the custodian
account. In the second leg, the money moved to accounts of friends and relatives, including those
of one Sheila Premnath and Shivaraj’s mother Diksha.