Abstract

In India, there are multiple investment avenues available to meet the differing needs of investors. These investment options differ from each other based on their returns, maturity period, and the risk taking capacity of the investors, among other things. In terms of their returns, they can be classified into high return and low return classes. However, risk and returns go hand in hand -- the higher the risk involved, the higher the returns to be expected. Investors who aspire for higher returns have to bear a high level of risk as well. An example is an investment made in the highly volatile stock market. As far as the time aspect of the investment is concerned, there are financial instruments which are short term in nature and these include savings bank accounts, money market or liquid funds, and fixed deposits with banks. On the other hand, there are some financial instruments which offer a long-term horizon for investment. These include post office savings, public provident fund (PPF), company fixed deposits, bonds, and mutual funds. Small savings schemes in India are framed and enacted by the central government under the Government Savings Bank Act, 1873, and Government Savings Certificate Act, 1959. Small savings schemes came into existence after independence with the objective of providing safe and simple investment opportunities to the lower and middle income groups. These schemes were channelized and administered by government institutions such as post offices and nationalized banks. With the same objective, the PPF was established in 1968 for individuals to save for their investments.

Learning Objectives

The case is structured to achieve the following Learning Objectives:

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Keywords

Time value of money, Present and future value of annuities, Security analysis, Small savings schemes, Post office savings, Public provident fund (PPF), Company fixed deposits, Bonds, Mutual funds, Monthly Income Account, Kisan Vikas Patra, National Savings Certificate