For investors who are moderate on their risk taking mentality have hybrid products to choose from. This report will deal with various investment products that are provided by financial institutions and the implications of market interest rates on investors and banks. Long term savings and investment products provided by Retail banks and Non Banking Financial Intermediaries or NBFC’s Some of the popular long term investment products provided by retail banks and NBFC’s are as follows. Fixed Deposits: Fixed deposits, as the name signifies, have a fixed tenure during which the investments cannot be withdrawn. Withdrawal is possible in between the tenure, but in such a case the investor will have to forgo certain benefits as early withdrawal charges. Bonds: Bonds are debt instruments that are issued by government or corporate. Bonds are fixed income securities that provide a fixed rate of return over a period of time. As a result, it is less risky too. Debentures: Debentures are similar to bonds in its nature with the only difference being they are issued only by corporations. Debentures provide fixed rate of interest and comes with a lock in period of usually more than 2 years. Mutual Funds: Mutual fund is a collective fund management system in which the amount collected from a large number of investors is invested into certain asset classes based on the nature of the fund. The investors who invest in mutual funds will get units of the fund of which the value depends on the price movement in the assets they are invested in. Pension Funds: A pension fund is a very long term investment product that is intended to give retirement income for the investors. Investors contribute a certain amount on fixed intervals which is accumulated and invested in safe asset classes. These are returned to them at the time of their retirement. Implications of increase in general interest rates on individual savers and investors An increase in the general interest rates will have a considerable impact on the investment portfolio of investors and savers. “When interest rates are rising, both businesses and consumers will cut back on spending” (Investopedia, 2011). The cut back on spending by customers and businesses will lead to less corporate earnings than before. The poor corporate earnings will cause the stock prices to drop at the overall market. A fall in the stock market will affect all the investment products that have the investment pie in stocks. Investors and individual savers, who have invested directly in the stock markets or invested in the stock markets through mutual funds and other products, will see their corpus going down. A rising interest rate can also affect the investors in terms of the low risky instruments like bonds. The prime relationship to be understood is that there is always an inverse relationship between the interest rates and bond prices. When the market interest rate rises, the bonds with lesser interest rate than the market rate will turn to be less attractive for the investors. The investors receive interest at a lower rate as compared to what is offered by the market. This will not be a big issue if the investor holds the bond until its maturity. But any plans to sell the bond before the maturity will reap fewer benefits when the market interest rates are higher (Williams, 2009). The investor can definitely hold on to the bonds
Introduction Financial sector has seen magnificent changes since last few decades. Though, unregulated financial inventions had put the world to one of the worst financial crisis ever, it still offers a variety of products for investments. Unlike few decades ago, where investments were limited to very few instruments, there are a lot of investment avenues at present…
Interest rate changes affect individual savers and banks directly and indirectly. The monetary regulatory authority has to consider all these factors before determining the interest rate. I. Long Term Savings and Investment products of retail banks and non-banking financial intermediaries (NBFI’s) Long term investments are those investments which are made for a solid period of time.
It therefore enables borrowers and savers to meet in the most efficient manner. It is also fundamental to note that this market facilitates economic transactions by hedging and trading in resources and goods. An efficient financial market will enable capital allocation to investments that provide maximum return.
They act as intermediaries between the borrowers and the lenders of finance. They consist of both banking and non-banking institutions. The various types of financial institutions include clearing banks, investment banks, saving banks, building societies, insurance companies and pension funds.
CSR means being a good steward to society's economic and human resources." The World Business Council for Sustainable Development defines CSR as the business commitment and contribution to the quality of life of employees, their families and the society overall, to support sustainable development.
nisation’s obligation to maximise its positive impact and minimise its negative effects in being a contributing member to society, with concern for society’s long-run needs and wants. CSR means being a good steward to society’s economic and human resources.” The World
The various types of financial institutions include clearing banks, investment banks, saving banks, building societies, insurance companies and pension funds. These operate in a competitive financial market where the objectives of firms are met. The objectives of the firm include profit maximization, wealth maximization, employee welfare, etc.
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