The Reserve Bank of India (RBI) recently announced a rise in the interest rates on savings bank account. Which should have made bank clients satisfied as most of them leave large amount of cash resting in savings accounts.
Of course, they are going to earn half-a-percent more on cost savings bank accounts now. But, the moot point is: Does that help make the savings account the best area to soak the funds of yours, effuel device that will be idle until they are spent or invested?
Cost savings bank account
Your salary goes directly into the savings bank account. Your housing EMI devours a considerable component of it. Then the cheques you have issued for your credit card payments, utility bills, SIP etc eat more in it. The balance amount gets accumulated in the savings account month after month.
That is the story of a normal savings bank account, which offers 4 % as interest to the savers. The interest is calculated on the daily balance in the account of yours. Past, the curiosity was calculated on the lowest amount in the account in between the 10th of each month as well as the final business day time of the month. The interest is paid to help you at the end of the quarter or half year. That means you get more cash now on the savings account of yours than what you have a season ago. But does that still make savings account the most effective area to park your idle money?
Liquid as well as liquid plus funds
Among the greatest advantages of a savings account is liquidity. You are able to take the amount whenever you want. But you will find avenues that provide better returns than savings accounts, without impacting liquidity much. They are known as liquid money.
Liquid financial resources are open ended cash market mutual fund systems that invest in call money industry as well as other fixed income securities with a maturity period of under ninety one days. Liquid and also funds, likewise known as ultra short-term bond money, are debt mutual funds in which the fund manager invests in securities that might consist of tools with over ninety one days’ residual maturity. The yield is typically higher for instruments with longer term. Obviously, addition of instruments with more than 91 days to mature improves the return of liquid and also money.