Where do you save when bank rates dip

Where do you save when bank rates dip

India’s biggest commercial bank, State Bank of India, has reduced savings bank deposit rates, signalling lower term deposit rates as well. The RBI is likely to cut its policy rate and the government would, in order to assist the transmission of the rate cut, reduce the administered rates on small saving instruments such as the Public Provident Fund.
A low-inflation, low-interest rate regime is good for investment and growth, but bad for a class of people who habitually rely on fixed deposits in banks for their income, which, along with bonds, account for a fifth of the financial assets Indians hold. Senior citizens dominate this section. They urgently need smart alternatives to bank deposits, to earn a decent income from their hard earned retirement savings.
For those who are young and in the workforce today, the National Pension System (NPS) is a fairly efficient and low-cost way of acquiring diversified claims on the incomes generated by the country’s production capacity. Subscribers get the benefits of professional fund management, pooling risk and diversifying asset classes, electronic access to the same account from anywhere in the country and very low charges and fees.
But for those who have retired and have a corpus to invest and know nothing of annuities, reverse mortgages or even a critical illness insurance plan, the future looks insecure and bleak when banks drop their deposit rates — until someone comes along with a Ponzi scheme that offers a 20% rate of return. India needs a campaign for financial literacy. People must learn about debt mutual funds, complete with the tax benefits they offer, and have access to other saving options.
The NPS Tier 1account is meant for accumulating a saving during one’s work life. The Tier 2 account offers the same investment opportunity, without a lock-in period, deployment mandate for the accumulated corpus or the tax benefits of the Tier 1account. It is ideally suited for a retired person, but is open only to those who have a Tier 1 account. The government should ask NPS to open up access to its Tier 2 account to all senior citizens.