A 'bulging wallet' or a 'fat bank balance' were traditionally looked upon as signs of wealth. They are increasingly also indicators of wasted opportunity. When the banking network was sparse and difficult to access, it made sense to keep cash at home for sheer convenience. Some people also did so to avoid paying sales tax on the goods they bought. Then came online banking, Jan Dhan and finally Demonetisation. People moved their money, willingly or unwillingly to the banking system. A happy ending? Not quite. Opportunity is still being wasted and inflation is still robbing depositors of their money.
Bank savings rates are still below the inflation rate making savers poorer every day. Fixed deposits offer a slightly better deal but even their rates usually fall below the inflation rate after factoring the effect of taxes. They also tend to lock in your money. So what do you do?
The answer is to take advantage of a financial innovation that is offered by India's fast maturing mutual fund industry - ultra-short term funds. These funds typically offer rates that are higher than fixed deposits of a corresponding maturity, a more efficient tax treatment and more convenience by avoiding 'premature withdrawal penalties.' It would previously take 1-2 days to get the money from your fund into your bank account - this has now been cut down to same day or even instant withdrawal in many cases.
Of course they don't offer guaranteed returns but the risks are low and manageable, as we have explained in this article. They also offer a better deal than the certainty of losing out to inflation that bank depositors are faced with.
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