How 3.5% interest rate on savings can equal 0%

Expense Account, Mint

Unless the banks can spike it again, from 1 April, we’ll get the 3.5% on our savings bank accounts that we believed we were getting all these years. Of course, post-inflation and tax, we’re losing money every day by leaving it in that terribly convenient, yet purchasing power killer, savings bank deposit. But few knew that the returns were sometimes zero, not the 3.5% that we assumed we were getting. The trick, as in everything financial, is in the detail. I remember learning by rote in an early economics class that savings deposits earn interest on the lowest balance between the 10th and the end of any month.

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Five concepts you need to understand while investing

Expense Account, Mint

No, this is not about what this column expects the new government to do for financial sector reform. It is assuming that these are going to be fast-tracked, and along with new products and services, consumers of financial products will bear the burden of too much choice. In his book The Paradox Of Choice, sociology professor Barry Schwartz links excessive choice to consumer misery. He shows how too many similar-looking options actually cause consumers to freeze and prefer status quo to taking any proactive decision. While in the US the number of mutual fund schemes outnumber listed stocks, India is getting there with at least 1,500 funds and investment-linked insurance plans. This number is set to balloon in the next five years as more firms line up at the Indian doorway to get a piece of the vast Indian financial products market.

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