Group 1 - The State Bank of India (SBI) chairman CS Setty emphasized the need for a level playing field in tax treatment for all financial products, particularly fixed deposits, as bank deposits lag behind credit growth due to a shift towards mutual funds [4][2] - SBI Research recommended aligning tax rates on deposit interest with capital gains to encourage household savings in banks, reflecting a broader consensus in the financial sector on fiscal prudence and consolidation [4][2] - The Indian Banks' Association has been advocating for tax benefits for fixed deposits, highlighting the current eligibility for deductions under the old tax regime, which is less favored by taxpayers [4] Group 2 - The ratio of mutual fund assets under management (AUM) to bank deposits has increased significantly, from 12.6% in 2015 to over 33.5% in 2025, indicating a structural shift in investor behavior [3][4] - Bank deposits have grown nearly three times over the past decade, while mutual fund AUM has seen more than seven times growth, suggesting a trend where savers are increasingly seeking better post-tax returns in equities [3][4] - Concerns have been raised by industry leaders, including Uday Kotak and MV Rao, regarding the systemic risks posed by the ongoing shift of funds from bank deposits to non-banking assets like equities and mutual funds [3][4]

Core Viewpoint - The government's decision to maintain interest rates on small savings schemes will limit banks' ability to further reduce deposit rates, impacting their overall deposit strategies [1][9]. Group 1: Government's Decision on Small Savings Rates - The government has decided to keep interest rates unchanged for various small savings schemes for the January-March 2026 quarter, including the Public Provident Fund (PPF) at 7.1%, Sukanya Samriddhi Yojana at 8.2%, and National Savings Certificate (NSC) at 7.7% [3][4]. - This marks the eighth consecutive quarter that these rates have remained unchanged, despite the Reserve Bank of India (RBI) cutting the repo rate by 125 basis points since February of the previous year [5]. Group 2: Impact on Banks and Deposit Rates - Banks are facing challenges in reducing deposit rates further due to the unchanged small savings rates, which could make deposits less attractive compared to alternative investment options [8][10]. - The weighted average lending rate (WALR) on fresh rupee loans decreased by 69 basis points from February to October 2025, while the weighted average domestic term deposit rate (WADTDR) on fresh deposits declined by 105 basis points during the same period [5][6]. - Deposit growth has slowed to 9.35% year-on-year, while credit growth has risen to nearly 12%, widening the credit-deposit growth gap by over 260 basis points [11]. Group 3: Market Competition and Strategy - Banks are experiencing increased competition from capital markets, particularly mutual funds and equity markets, which are attracting household savings away from traditional deposits [14]. - Each bank will determine its deposit rate strategy based on its credit growth ambitions and net interest margin (NIM) outlook, influenced by the liquidity conditions and interest rates of competing investment products [10][14]. - The certificate of deposit (CD) market has seen significant activity, with banks raising over ₹50,000 crore through this route in recent weeks, indicating a shift in funding strategies [15].

Core Concept - The article emphasizes the importance of weighing risks against rewards in investing, highlighting that no investment is completely risk-free and that understanding this balance is crucial for achieving financial goals [1][15]. Risk in Investing - Risks in investing are categorized into several types, including market risk, inflation risk, foreign exchange risk, liquidity risk, and default risk [6]. - An example illustrates that while a low-interest savings account offers safety, it risks erosion of cash savings due to inflation, which has averaged 2.36% over the last five years, compared to the historical annual returns of about 8.3% for Singapore's Straits Times Index [4]. Reward in Investing - Rewards from investments can come in various forms, such as capital gains, dividends, and interest income from fixed deposits [5][7]. - Singapore Airlines is cited as a popular dividend stock, having paid out a dividend of S$0.40 over the past 12 months, resulting in a trailing dividend yield of 6.1% based on a share price of S$6.54 [8]. Risk-Reward Trade-Off - The general rule in investing is that higher risk typically correlates with the potential for higher returns, as seen with high-risk assets like cryptocurrencies versus lower-risk government bonds [10]. - Medium-risk assets, such as blue-chip stocks, can offer capital gains and regular dividends, but investors must research the fundamentals of these companies to ensure they can withstand market volatility [11]. Balancing Risk and Reward - Beginners are advised to start with lower-to-medium risk investments and gradually include riskier assets as their knowledge and confidence grow [12]. - Key considerations for investors include their investment horizon, risk appetite, and desired diversification, which will influence the types of financial products they choose [14]. Investment Strategy - The article stresses the importance of not chasing high returns without understanding the associated risks and encourages prudent long-term investment strategies [18].