Hence a society which has such a low foundational value of trust, financial institutions like banks seemed to have never lost their value. Even today we see people trusting bank FDs more than Mutual Funds or bonds or any other financial instrument and this is the reason we see so many organizations running to seek a banking license as soon as possible because that gives them quick credibility as well as license to all sorts of business in India. Nowadays, a bank is not just a bank. Bank is a depositor, creditor, broker, insurance agent, GST counselor-its almost everything under one roof. Adding to this is the safety net that you get for being a bank in India. You can literally get away with everything just because you are a bank and you need to  be protected in order to maintain the trust of the people in the banking system and financial system of this country. Eg: Yes bank and PSU bank recapitalisation

Hence this is too big an incentive which perhaps motivated one of the biggest private bank in the country to merge its entities finally into one single entity which is HDFC Bank. HDFC Limited will be merged into HDFC Bank. This big move will give the bank access to 9 million customers as well as grow its assets base to twice that of ICICI bank. Add to this is the low cost of raising funds for banks which HDFC is going to enjoy now after joining hands with HDFC banks. HDFC Bank is already the largest in terms of market capitalization and after the merger, it may be amongst top five-six banks globally. The merger action augments the ability to take big ticket loans and comes at a time when the capital investment is picking up. It is believed that such merger can trigger further more mergers into the banking system. 

Well, we might be seeing some frenzy banks and NBFCs merger in the coming times as well as banking sector consolidation. 

As the markets are falling, EPF investment has suddenly become the cynosure of everyone and equity markets have started bothering everyone. Little do they understand that, with the equity markets falling, so is the guaranteed return on investment in the EPF which has come down to a record low of 8.1% – lowest in 4 decades perhaps. 

But why is this happening ?

EPF was constituted way back in 1952 where they used to invest in government securities, state guaranteed bonds etc. With the onset of 2015, as the political scenario of the country was about to change, so did the economic scenario because the government decided to keep an equity exposure of about 5% which was eventually increased to 15%. Now the government is even mulling to increase it to 25% as well. 

But this doesn’t answer our initial question- why is the government reducing its guarantee?

The simple reason for the same lies in the fact that with EPFO also having equity exposure, guaranteed return has become a too big a promise for them and with this guaranteed thing looming over the government’s head, they are soon planning to reduce the rate of interest even further and we might see it soon come down even below 8% as well. Hence with every passing year, we see the disappointment and despair run down the eyes of the investor. 

Keeping view of the same, pure equity investment in general have fared well above the EPF investment keeping the same period of investment. 

Still want to invest in EPF ? 

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