SAVINGS AND INVESTMENTS

MEANING OF SAVINGS
• According to Fitzsimmons (1950): “t5 opy”lllllllllllllllllllllll.
• The term savings means “ refraining from spending for consumption needs.”
Savings are the difference between earnings and expenditure
• It can be defines as, “certain proportion of income kept aside for future use”.
 OBJECTIVES OF SAVINGS
• Reduces economic insecurity especially in old age
• Help in period of inability
• Useful during an emergency
• Becomes a source of income
• Savings are useful habit to cultivate as it is a sure means of family security
• Useful for children’s marriage, education or other family expenditure
• It gives feeling of security
 CHARACTERISTICS OF A GOOD SAVINGPLAN

• Safety of original amount invested

• Return – Higher the return, the greater is the risk
• Convenience –
plan should be easy to handle and understand
• Liquidity – Easily converted into cash
• Income tax relief offered on certain saving
TYPES OF SAVINGS

PPF Banks Post Office Insurance

UTI
Bonds
Schemes
GPF CPF
PROVIDENT FUND (P.F.)

• Compulsory saving schemes for all salaried employees

• The accumulated amount with interest is returned to employee on retirement
• It is calculated as a percentage of your salary (basic pay and dearness allowance
if any). Specific amount is deducted from salary every month
• Income tax relief is given
• Rate of interest is 8.6% per annum (rate of interest changes every financial year)
• Loan can be taken against the fund as per rules laid down by the Provident
Fund Commissioner
 TYPES OF PROVIDENT FUND

Provident fund (P.F.)

Contributory
General Provident Public Provident
Provident Fund
Fund (G.P.F.) Fund (P.P.F.)
(C.P.F.)
VOLUNTARY SAVINGS
BANKS
• Banking is an important aid to business
• Banks of different types provide finance, which is the foundation of every
business activity
• A commercial bank is a business organization that deals in money; it borrows
and lends money in turn making profit

• Acc. To Dewett and Varma, “Banks act as intermediaries between those who
have surplus money and those who need it”.
• In short, they borrow to lend
• They borrow in the form of deposits and lend in various forms of advances
 FUNCTIONS OF BANKS

TO ACCEPT/RECEIVE DEPOSITS

RECURRING BANKERS
SAVINGS BANK CURRENT FIXED DEPOSIT CASH
DEPOSIT CHEQUE/PAY
ACCOUNT ACCOUNT ACCOUNT CERTIFICATES
ACCOUNT OREDERS

SAFE DEPOSIT
CREDIT CARDS VAULTS/
LOCKERS
 ADVANCING LOANS

DISCOUNTING
BY ALLOWING BY CREATING A BILLS OF TRANSFER OF
AN OVER DRAFT DEPOSIT EXCHANGE/ MONEY
HUNDIES
POST OFFICE

• The post office savings bank is now the largest savings institution in the country
with network of about 1,45,000 post office since independence

• The government has been introducing various schemes from time to time to suit
the varying requirements of the society
• The postal banking system is now having more saving schemes than commercial
banks

• Commonly used institution for savings

• Available even in remote areas
• One can save time by taking help from agents
 POST OFFICE

POST OFFICE POST OFFICE POST OFFICE

SAVINGS POST OFFICE TIME
MONTHLY INCOME RECURRING
ACCOUNT DEPOSIT ACCOUNT
SCHEME DEPOSIT ACCOUNT

NATIONAL GOVT. OF INDIA

KISAN VIKAS PUBLIC PROVIDENT
SAVINGS SENIOR CITIZENS
PATRA FUND ACCOUNT
CERTIFICATE (NSC) SAVINGS SCHEME
 INSURANCE

• Insurance is a social device in which a group of persons having to face a similar

kind of risk contribute to a common fund, to compensate the few who actually
suffer
• The document which contains the contract, is called “the Insurance Policy”
• The person who is incurred is called “the Insured” and the firm, which insures is
called the “Insurer ”
• A ‘Premium’ is the sum of money, which the insurer gets from the insured for the
former ’s guarantee to make good a specified loss suffered by the latter
• ‘Risk’ means a happening or contingency against which insurance is affected
 LIFE INSURANCE

• Life Insurance is a contract between the insurance company and the insured whereby the insurer
in consideration of a premium, undertakes to pay a certain sum of money on the death of the
insured or on expiry of a stipulated period which ever happens earlier.
 ADVANTAGES OF LIFE INSURANCE

• Life insurance is a convenient mode of providing safety to the dependants in the event of
premature death of the family holder

• Life insurance is a sort of provision of old age

• Now a days, many types of policies can be taken out to suit the capability and convenience of the
persons who intend to get assured
• It helps to provide money for the education or marriage of children. It provides finance for
replacement of an asset. Thus, life insurance policy provides financial support to policy holders in
case of urgent need. Life insurance has a loan value.
 ADVANTAGES OF LIFE INSURANCE CTD…

• The habit of saving can be inculcated in people. Taking a life insurance policy
induces people to save compulsorily for payment of premium and for keeping the
policy alive or in force.
• In case of ‘with profit’ policy the insured can get bonus also
• A Life insurance policy can be assigned to third person for the purpose of raising
loans
• Life insurance helps capital formation that ultimately contributes to the economic
development of the country
 KINDS OF LIFE
INSURANCE
POLICIES

ENDOWMENT WHOLE LIFE MONEY BACK MARINE

FIRE INSURANCE
POLICY POLICY POLICY INSURANCE

GENERAL
INSURANCE
 GENERAL
INSURANCE

PERSONAL ANTI – THEFT,

MOTOR LIABILITY OF FIDELITY
ACCIDENT ROBBERY
INSURANCE EMPLOYERS INSURANCE
INSURANCE INSURANCE

SOCIAL
INSURANCE
 BONDS

• Bonds are issued by a corporation or by government, the investors are lending money to them and
hence they become creditors
• The organization issuing bonds acknowledges that it owes the bond holders a certain sum of money and
pledges to repay on a certain date and under certain conditions
• It also pledges to pay a certain amount of interest on specified dates
• The rate of interest that the borrower agrees to pay on the borrowed money is printed on the bond and
is called “stated rate”. The actual return received by the buyer is called “effective rate”.
• Paying less than the stated value of the bond is called buying at a discount and paying more is called
buying at a premium.
• The due date of maturity is the date on which the borrower repays the principal amount.
 TYPES OF
BONDS

GOVT. OF
GILT – EDGED LOW – GRADE INDIA – 8.00%
BONDS BONDS SAVINGS
BOND
 INVESTMENTS
• An investment is the sum of money that one has paid to an agency for safekeeping and earning
interest

• Investing may be defined as “ Committing money for the purpose of assets, based on a careful
analysis of risks and rewards anticipated over a period of one yearor more”.
• Investing funds is the process of placing them in a more or less permanent from, with the
expectation of assuring the security of the principal and of receiving a regular and predictable
return on it.
OBJECTIVES OF INVESTMENT

• Security after retirement

• Education children
• Building up an estate
• Improving status and standard of living
 TYPES OF
INVESTMENTS

JEWELLERY PROPERTY SHARES DEBENTURES

 SHARES

• The share capital of a company is divided into small parts and each part is known as a ‘share’
• Share is one of the units into which the total capital of the company is divided
• Shares are also known as “ownership securities” and share capital as the “owned capital”
• A company share is a movable asset and can be brought and sold by people
• The value written on the share is known as its “face value” or “nominal value”
• However the market value of shares increases or decreases and is therefore not mentioned on the
share certificate
• A share holder is the part owner of the company. He is given a share certificate mentioning the
number of shares purchased by him. He has no liability after paying the full value of the share
 SHARES CTD..

• Annual reports are issued to share holders informing them about the company’s performance
• The annual general meeting is used to discuss and pass company accounts, elect company directors
and approve dividends.
 TYPES OF
SHARES

PREFERENCE
EQUITY SHARES
SHARES
 PREFERENCE
SHARES

Cumulative and Redeemable

Participating and Convertible and
Non – and
non participating non - convertible
Cumulative Irredeemable
 DEBENTURES

• Debentures are instruments for raising long – term debt capital

• Debentures is an acknowledgement given by the company in respect of the amount received from
debenture holders

• Debenture holders are the creditors of the company

• The obligation of the company towards its debenture holders is similar to that of a borrower who
promises to pay interest and capital at specified time.
 TYPES OF
DEBENTURES

Redeemable Convertibl
Secured and Bearer and
and e and Non
Unsecured Registered
Irredeemable Convertibl
e
THANK YOU!