Money Bites
Short bites to keep you informed of all matters that impact your wallet and wealth.
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While the year 2020 seemed to be a year that we all would like to forget, 2021 seems to have started off well with a trio of lower Covid-19 cases, vaccinations, and the economy doing better than expected.
The Union Budget announced earlier this week with impetus on healthcare and infrastructure hit the right chords to take Sensex past the 50k mark again.
Top Bite this Week
Some state-owned banks to go private
What’s going on here?
The Union Budget has proposed the privatisation of two state-owned banks, In an interview later, the FM also suggested that more could follow later. The exact details of the banks are not known yet but different names like PNB, BOI, or Bank of Baroda are doing the rounds.
What does this mean?
The Govt of India is the majority owner of many state-owned banks like PNB, Bank of India, Indian Bank, etc. With privatization, the Government intends to transfer the control of running two of these banks to a private player.
Why is it being done?
Many state-owned banks are not run efficiently. As of date,three of them are put under the Prompt Corrective Action list by RBI to improve their financial health. And the Govt needs to keep pumping in money frequently to bail them out. As of 2019, the Govt had pumped in Rs 2.5 lakh crore.
Moreover, the focus now is to get the economy back on track, and selling off some assets is a way of meeting the expenses without raising taxes. This budget also laid emphasis on less government and more governance.
How will it affect you and me?
Private players would look at making the banks profitable. So, certain non-profitable branches may be closed and staff may be trimmed with an offer of VRS. Rural areas that are serviced mainly by state-owned banks may be hit. But as an account/deposit holder of the bank, you may be in for better, efficient, and faster service with a private player taking over.
Your questions answered
Are mutual funds safe to invest in? – Prabjot Kaur, Bangalore
As an investor, the safety of your investments is something that you should always look for.
Mutual funds are collective investments that are pooled together to invest in various market-linked financial assets like equities, debt, commodities, etc. So mutual funds cannot be free from market risks.
Having said that, mutual funds are managed by experienced fund managers and are strictly regulated by the Securities and Exchange Board of India(SEBI). So, the safety of your investment is guaranteed, but the returns on your investments cannot be guaranteed. The returns will always depend upon your choice of the mutual fund, market conditions, the period for which you hold your investments, and others.
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