It is time Indian investors started differentiating between savings and investments. Money kept in banks could be safe, secure and liquid; but one needs to invest in markets to earn returns.

According to Sandip Ghose, Director of National Institute of Securities Markets (NISM), saving has got into the DNA of Indian investors; but it is not an investment at all.

Criticising a section of people who consider putting money into bank fixed deposits (FDs) or other such instruments as ‘sound investment’, he said, banks were not set up with the purpose of growing money.

Inflation to rise

“There is no written literature anywhere in the world which says banks will help money grow; it will keep it safe, secure and liquid,” Ghose told BusinessLine on the sidelines of a seminar on the mutual fund industry organised by Bharat Chamber of Commerce here on Thursday. Ghose’s comment comes at a time when FD rates, which are already low, are expected to inch down further.

Currently, interest rates for one-year retail domestic term deposits below ₹1 crore rule around 6.25-6.5 per cent. The rates are still lower on longer tenure deposits for most banks.

Inflation, which has remained low for sometime now, is likely to rise, moving forward. Rising crude and food prices are likely to exert pressure on inflation. So, it is important to invest in instruments that can beat inflation.

“Global prices of oil, which ruled benign, have started rising. Being a huge oil consuming economy, India’s inflation is expected to rise,” he said.

Market investments, he said, should be done based on sound advise from a financial advisor. A majority of investments currently being made are based on the advice of neighbours or friends and hence, carry the risk of going wrong.

According to him, staying invested for the long term in any investment can compound returns.

But, unfortunately, Indian investors understand the effect of compounding only when it comes to a credit card bill and not while investing.

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