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FDs, mutual funds take shine off gold: RBI

Financial savings has increased by 20 basis points i.e. from 7.5% of GDP to 7.7% on account of investments in mutual funds and fixed deposit

August 26, 2013 4:08 IST | India Infoline News Service
Household investments in mutual funds and fixed deposits have grown, while investments in gold has come down, according to RBI's (Reserve Bank of India) annual report 2012-13.

The report highlighted that financial savings has increased by 20 basis points i.e. from 7.5% of GDP to 7.7% on account of investments in mutual funds and fixed deposit whereas household investments in valuables, especially gold, declined from 2.4% of GDP to 2%, a fall of 40 basis points compared to the corresponding period last year.

The central bank said, “The marginal increase in the household financial savings rate during 2012-13 emanated from the higher growth in savings under bank deposits and mutual funds even as life insurance funds remained sluggish and outflows under small savings persisted. This could have helped somewhat to buttress household financial savings in 2012-13 and may even show up in an increase in household physical savings.

“At the same time, the financial liabilities of households increased, largely driven by acceleration in personal loans and retail credit, which dampened household financial savings on a net basis but may get reflected in higher household physical savings during 2012-13.”

In its annual report, RBI reiterated concerns over CAD (current account deficit) and said in April-June, the CAD is likely to be higher than the 3.6% of GDP seen in January-March quarter.

However, CAD is expected to moderate from July-September onwards and will likely be lower than the historic high of 4.8% of 2012-13 owing to the recent measures by the government, the report said.

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