Mutual funds and bank deposits: Strategic changes in investment trends you should know about

Mutual funds and bank deposits: The shift in the way consumers look at money, from savings to investments, has tightened the availability of funds in banks. Consumers are shifting from saving to investing, with more choosing mutual funds over traditional savings accounts, reducing the amount of money available in banks. Adhil Shetty, his CEO at BankBazaar, explained that this change in consumer behavior has led to tight liquidity for banks.

“We are witnessing a shift in consumer mindset. Consumers are moving from a savings mindset to an investment mindset. As a result of this change, more and more consumers are opting out of savings products such as savings. As many industry leaders have recently highlighted, this is causing a liquidity squeeze with banks, resulting in a desire for short-term deposits. , one-year rates are expected to rise and long-term rates are likely to remain flat,” Adil Shetty said.

“Consumers, especially seniors, can take advantage of these short-term interest rate hikes to increase their interest income,” he added.

On February 8, the RBI Monetary Policy Committee opted to keep the repo rate unchanged for the sixth consecutive time, citing global uncertainty and the goal of reducing retail inflation to 4%.

The Reserve Bank of India (RBI) is keeping banking system liquidity tight as part of its ‘withdrawal easing’ monetary policy approach.

“On the liquidity front, the assurance that the RBI can quickly and flexibly supply the required amounts into the system is a positive sign given the recovery seen in credit growth last quarter and the additional demand for currency in circulation this quarter. ‘election,’ said MD of Resurgent India Jyoti Prakash Gadia.

According to RBI data, illiquidity in the banking system has reduced significantly.It fell from approx. INRApproximately $3.46 billion on January 24th INR1.4 billion on February 4th.

It is worth noting that central banks play an important role in managing liquidity in the banking system through various monetary policy tools such as open market operations, repo rate adjustments, and reserve requirements. Central banks closely monitor liquidity conditions to ensure financial stability and support economic growth.

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