‘Banking’ on deposits not a good idea, says this fund house


With savings accounts yielding low returns, Nippon India woos salaried class to deposit their pay with the MF for investments

A savings bank (SB) account, where pay is credited for millions of salaried-class people across the country every month, earns one of the lowest interest rates — mostly 3.5% — among most categories of deposit accounts.

As a result, a large chunk of money flows out from savings accounts every month after the salary is credited, as individuals eye a higher return by investing in fixed deposits, mutual funds, direct equities and public provident fund, among other avenues.

However, this requires some amount of paperwork or efforts, at least initially, as the money has to be moved from the savings account to another account.

Nippon India Mutual Fund, earlier known as Reliance Nippon Life Asset Management, is targeting this huge segment through its ‘Salary Addvantage Program’, wherein the salary of an individual is directly credited to his account with the fund house and not a bank, before it is invested in liquid funds to earn higher returns compared with bank deposits. “We directly approach companies and explain the benefits of the scheme. If they are convinced, we create accounts for their employees, wherein the salary is directly credited and invested,” said Kapil Arora, segment head — New Business Initiatives, Nippon India MF. The scheme was launched in 2017 and the fund house has been able to bring on board over 200 organisations with names including Shapporji Pallonji, Ola, Swiggy, Bajaj Finserve, Angel Broking and Prabhudas Lilladhar.

As of November, the scheme had more than 37,000 investors with the monthly average inflow pegged at over ₹20 crore. Further, the assets under management of such investments is around ₹280 crore, with around 8,000 systematic investment plans as well.

Incidentally, an individual also has the flexibility of choosing the quantum of salary — say 50% or may be just 35% — that goes directly to the fund house and the rest remains in his SB account.

The aim is to generate higher returns than a savings account.

Nippon India Liquid Fund, in which the investments are made, delivered a compounded annual growth rate of 7.01% in the last three years.

According to Mr. Arora, liquidity is the biggest concern that investors have, since a savings account is completely liquid.

A debit card on offer

“An investor can withdraw a maximum of ₹50,000 per day. We also give Visa debit cards to all our investors that can be used across ATMs and shops,” said Mr. Arora.

“There is huge potential for growth as there are still millions of salaried people whose salary is just lying idle in the savings account. With the right push and awareness, they can start investing without taking any undue risk,” Mr. Arora said.

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Printable version | Jan 18, 2020 10:34:33 PM |

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