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Mutual funds gain attraction compared to savings account
Posted on: 31/Aug/2017 11:48:20 AM
As a number of public and private sector banks have made a steep reduction in savings account deposit rates, it is likely that the liquid mutual fund schemes may see a hike in interest.
A renowned rating agency states that due to the benefit of liquidity and flexible maturity of mutual funds that come with simplified redemption options and increased return on savings rate, and due to lowered interest rates of savings account deposit rates, there may be increased prominence of the former as people see it as an alternative to savings deposits.
In the liquid schemes, a range of 6.5 to 7 percent of annualized returns is promised in the past 1 year. The returns are however standardized to 6.25 to 6.50 percent in the past 5 months due to declining repo rates. The pre-tax returns is higher by 2.75 percent on an annualized basis as compared to savings account. Coming on to the income tax benefits pertaining to the interest on savings deposits, there is a difference of 0.87 percent to 1.63 percent between annualized returns of liquid funds and savings account, says the senior vice president of the rating agency.
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