ANIL PILLAI
Fixed deposits (FDs) in banks bring low returns to the investors these days. These are ideal investment option for investors with a low-risk appetite looking for assured returns. Fixed deposits allow investors to deposit their money for a specific period of time for a rate of interest which is typically higher than what is offered for a savings bank account.
Fixed deposit rate cuts
According to experts, under certain macroeconomic conditions such as high inflation, the Reserve Bank of India (RBI) adopts a tight monetary policy to regulate the credit available in the country. The RBI typically hikes the repo rates under such conditions (Repo rates are rates at which the central bank lends to several banks across the country). Consequently, banks raise their fixed deposit rates. Cash Reserve Ratio (portion of bank deposits that commercial banks have to deposit with RBI) rate cut brings in more liquidity into the system. The CRR cut has a long term impact on the interest rates on deposits. While repo rate and CRR cut largely affects the home loans segment, fixed deposit rates also plummet. Several banks cut interest rates on fixed deposits in select maturity baskets.
There are several factors which influence banks to either decrease or increase fixed deposit rates such as the following:
• Deposit rates are linked to the rate of inflation. Banks should give positive returns to depositors. Investors should, therefore, monitor the rate of inflation, which affects the lending rates. In many cases, despite depositors getting negative returns owing to high inflation, banks do not raise deposit rates, since that would affect their bottom line.
• Prevailing liquidity scenario in the country. If there is adequate liquidity, banks do not have to focus on retail fixed deposits for their needs as opposed to times of tight liquidity when banks have to turn to their own deposits.
• Demand and supply conditions. If there is less demand for credit, banks, more often than not, decrease fixed deposit rates. On the contrary, if there is high demand for credit, banks increase fixed deposit rates.
• Banks typically cut rates in anticipation of a lending rate cut.
• Falling call rates also signal the amount of liquidity available in the market (banks borrow from the call market for their short-term needs.) If the call market is lending at a lower rate, it in turn, affects interest rates on retail deposits.
• Banks usually cut interest rates when their fund costs plummet. If the rate of fixed deposits is high, a revision of base rates (basis for retail loans) is less likely unless the high-cost deposit rates are cut.
• Banks decrease fixed deposit rates in the near-term during times of muted credit demand affecting loan yields, which in turn, mars their net interest margin (NIM).
What are the solutions?
Only investments in high growth technologies can give better return on investments.
Artificial intelligence is essentially an encompassing concept that holds within its mandate multiple, often overlapping disciplines. These draw upon knowledge and processes from statistics, mathematics, computer science and other specialized expertise to create models, software programs and tools.
Companies such as Apple, Amazon, Microsoft, Google and Facebook are all employing AI technologies such as deep learning, machine learning and language processing to provide new and improved experiences across their services. They have been acquiring AI startups that target different capabilities and thus have developed technologies such as Siri, Alexa, Google Assistant and Google Lens, all available on consumer devices.
The applications of AI are multiple including:
• The challenges that supply chain management faces without the help of computational power can vary from lack of visibility, weak links, matching demand with production and regulation of suppliers.
• AI programs can control and respond automatically to scale supply chains in response to real-time or predicted demands. Machine learning and IoT devices are also looped in on the information exchange where intelligent monitors can automatically pinpoint failing links in the supply chain.
• AI can also make online retail experience more intuitive and compelling. Analytic systems can explore existing customer graphs to find new customers and virtual sales agents while predictive algorithms can engage with customers to increase sales.
• In managing operations, Artificial Intelligence programs can estimate the probability of failure in production components. Machine vision also provides automated visual inspections in which personnel systems can learn from employee data and past performance to allocate the best available employees.
• The IT industry also uses self-learning algorithms to predict and prevent maintenance requests.
It is no surprise then that the Indian landscape is also booming with AI research and start-ups
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