Annual Budget FY2020-21: How Small Investors Can Secure and Grow Their Financial Holdings

The enormous annual budgetary exercise by Government of India has begun for the Financial Year 2020-21. India is the fastest-growing trillion-dollar economy in the world and the fifth-largest overall, with a nominal GDP of $2.94 trillion. So our budget planning is a vast and complicated exercise involving several stakeholders – government, industries, bankers, investors, borrowers, workers, farmers, students. The list is endless. The budget needs to keep the interests of all these stake holders in mind.

This year the budget assumes greater significance because the country is going through an economic slump. There is a drop in GDP growth, industrial output, jobs and farmer incomes. Government’s Tax collections have dropped, especially because of low industrial output. Reduction in corporate tax is also another contributing factor. But the government needs to increase its spending in order to give a big boost to the sagging economy. At the same time keep inflation rates under control. The challenge before the honourable Finance Minister, Ms Nirmala Seetharaman is multi-fold.

As small investors and ordinary citizens, there are 2 major factors that have affected us quite severely in recent times. Let’s take a closer look at these factors:

Sharp drop in deposit interest rates  The average interest rate on FDs has dropped from around 9.5% to under 7%. This affects the cash inflow in households and small enterprises which depend on deposits for their investments. FDs have always been a favoured investment option in India, because they are reliable and insulated from market fluctuations. But the reduction in interest rates forces the general public to go hunting for more lucrative investment options.

Loss of credibility in financial institutions – Ever since the NPA crisis came to the forefront, banks and NBFCs are struggling to assure depositors that their investments are safe with them. The recent payment defaults by several banks has increased the fear in the minds of the investors. Even institutions with the highest credit ratings, indicating highest level of security, have failed. This raises questions in the minds of the investor on how reliable these ratings are. The scams in the chit fund industry are another example of the credibility crisis.

The above reasons have affected the investment patterns of the small investor in recent years. The gradual shift from FDs to mutual funds and equity markets is taking place. But the inherent risk in equity is not completely understood by the ordinary, financially illiterate investor.

So how can the budget help the small investor secure and grow his financial holdings? A few pointers are listed below:

  • Government is mulling over increasing the statutory deposit insurance cover for FDs from Rs 1Lakh. This must be implemented without delay.
  • The credit rating agencies and RBI regulatory frameworks must be strengthened. So that investors can rely on their assessment about the health of a financial institution.
  • Senior citizens investments and deposits must be safeguarded from financial risks as they have no other means of income. They must also be cushioned from sharp drop in deposit interest rates. More senior citizen friendly banking and insurance processes must be introduced.
  • Long term capital gains tax is a point of debate. Hopefully, the government will take a considered view on whether it should remain or be abolished.
  • The chit fund industry has already got the necessary legislative push needed last month with the passage of the Chit Fund Act amendments. The regulations must be strengthened and properly implemented within the chit fund industry. So that depositors can pick the secure and reliable chit fund houses with greater confidence.

Shanthala Chits has always been a strong advocate of investor rights and interests. The small investor – whether a householder or a businessman – is at the center of our focus. We have always believed in keeping our investors informed and our customer service is also tuned to take care of our investor’s welfare and needs.

We are a Government approved chit fund company with a 23 year successful track record and thousands of satisfied customers. Shanthala Chits is registered under the Chit Fund Act of 1982, Government of Karnataka. We are one of the most popular chit fund houses based out of Bengaluru, known for our customer satisfaction and secure investments. Get in touch with us and start with an investment scheme. We will be glad to help you out with the right scheme that matches your needs. Check our schemes here:

You could also contact us for any questions.

Let’s hope this year’s budget brings cheer to all of us and benefits the small investor. Wishing for a great turn-around in our economy and the prosperity of our nation.

Anuradha C

Anuradha is a freelance writer cum corporate trainer in the IT/telecom domain with over 18 years experience. She served in senior technical and management positions in Huawei and TCS for 10+ years. Then gave up the traditional corporate ladder to go solo - in order to escape horrendous city traffic and to be at her own boss!
Anuradha C

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