A SYNOPSIS Submitted for the fulfillment of the bachelor degree of commerce (Hon’s)

Under the supervision of: submitted by: Mr. Manish Rai Shilpi Agarwal


Fixed deposits of banks Fixed deposit is the term used in banking sector. The interest can be compounded quarterly. A Fixed Deposit is a specific sum of money deposited in a financial institution for a fixed term earning a preagreed interest rate.INTRODUCTION During last few decades the economic structure of India is enhancing which makes the people of India to earn more and to invest more.e. There is great flexibility in maturity period and it ranges from 15days to 5 years. 1000/.and there is no upper limit. Thus he can invest his savings in fixed deposits with banks and also in the share market. He also wants to get more returns in exchange of his investments. half-yearly or annually and varies from bank to bank. weather in fixed deposits or in share market. Every individual will always select a good investment plan because he wants to make his money more valuable and to seek more opportunities for future. In simple words. It is higher in case of longer maturity period. When we deposit some amount in bank and it gives a regular fixed profit then it would be called as fixed deposit in the bank. fixed deposit is the amount in the bank which does not change and gives the profit on every month of same percentage. Loan/overdraft facility is available against bank fixed deposits. of fixed deposits banks and share market. A Fixed Deposit also known as a Term Deposit is an account a certain sum of money is deposited in the bank for a specified time period with a fixed rate of interest. This is called fixed deposit. further to other financial institutions or companies which give them return in exchange on the basis of market conditions. Minimum deposit amount is Rs. The rate of interest for Bank Fixed Deposits depends on the maturity period. . Banks generally lends money. Today most of the banks used this fixed deposit. These two kinds of investment plans are both good for making the investments. The system operates in this way they take money from the investors and then with that they give loans to a third person at a higher rate of interest. Many peoples may have these doubts whether to invest in share market or in fixed deposits. This is a report which compares the two types of investments i.

If they are looking to invest in shares. These are managed and operated by large fund houses and in which just give our share of investment and the fund manager collectively invests our money under various portfolios in order to maximize the returns. who want to invest in their money in public or private sectors.Share market The share market is a place where the collective shares of different companies are traded. The main advantage of going for these deposits is that the depositors get high interest rates than the saving bank account holders. . Stocks represent proportional shares of ownership in the company that you are interested in investing. They will get lump-sum of money at a time. If one can study the present economic position of India. Stocks are traded on public exchanges which bring buyers and sellers together. after the completion of maturity period of the deposit. resulting in positive interest rate. they are searching for the best alternatives to save or invest their money. so aware of that what they are and how they are bought and sold. The businessmen in India have positive feeling regarding their financial position. This is the best source to rescue from the present liquidity crisis. he/ she can come to a conclusion that investing in a stock market will make him/ her to face many problems.000 shares of stock in a company that has 100.000 shares issued. resulting in negative interest rate. A lot of insecurity and confusions are faced by the investors. Many of the economists in India say that going for fixed deposit is the right solution. For example. the banking system in India is so strong till now. if you buy 10. In the share market the other forms of securities and derivatives are also sold. In these situations. otherwise we may increase our capital. when it compared to all the other sources where they can invest your money. As the economic position of India is mostly based on the government organisations. Though the economic position of all the countries is going on up and downs all over the world. The interest rate may be from 30% to even 60% but there we may lose our capital. the speculation and financial crises have not shown much effect on Indian economy. you own 10 percent of the company.

Literature review Dr. Now to discuss which one is better depends upon the risk that person can take because: 1) Share market follow the policy of high risk and high returns whereas fixed deposit follows low risk and low return. lifestyle and investment psychology. Fixed Deposits will give you higher returns when compared to Recurring deposits. and the marketer of the financial products. The knowledge of all these aspects is imperative for all progressive investors. it totally depends on your financial condition. I won’t suggest share market. academicians. following the right strategy to maximize the return on investment and proper allocation of investible funds. financial consultants. researchers. For higher returns I would always suggest you long term investments. If you have the amount that you wish to invest then go for Fixed Deposit else go for a recurring deposit. As it will have an Exit load.(Mrs. an individual investor has to confront his/her demographics.) Sushant Nagpal (2006) Psychology of investments and investor’s preferences every individual investor must follow three principles of investing: using a long investing approach. While applying these three principles. students. Ankit (22 Jun 2010) To compare between share market and fixed deposits you need to first need the objective of savings. Now coming to Recurring Deposit and Fixed Deposit. Though they both are under investment types but the Risk and Returns Factor associated with both of them differentiates them. Aradhya (21 June 2010) As you are planning for a short term investment. .

Consumers are found to respond to deposit rates. financial status and optionally age. The lack of complementarities between deposits and loans — where benefits are most likely to occur — suggests that claims of important synergies from an expansion of banking powers be taken with caution. banks may reduce costs due to complementarities in production (cost economies of scope) or raise revenues from complementarities in consumption (revenue economies of scope). consumers respond favorably to the branch staffing and geographic density. Moreover. For example if you are 35 invest 20% of surplus cash in FD. consumer decisions are based on prices and bank characteristics. Berger David.e. Pulley (Published: 26 February 1999) Title: Do consumers pay for one-stop banking? Evidence from an alternative revenue function In providing financial services jointly. Humphrey and Lawrence B. If 60 5% in FD.2) Fixed deposit can give upto 8% of return whereas the returns given by share market can be upto 70% is kept for long duration. Revenue economies of scope are investigated here for the first time and found to be insignificant over 1978–1990 for both small and large banks and for those on or off the revenue-efficient frontier. If you don't have surplus cash invest only in FD's. and geographic diversification. If you have lots of cash invest a percentage of it in FD depending on your age. Following the discrete choice literature. or switch between debt and equity fund based on the interest rate scenario. when market is expected to go down sell your MF units and buy when market is down. Nagaraj (published: 1998) . Consumers in most markets experience a slight increase in welfare throughout the period. Astrid A. i. B. Also actively manage your portfolio or investment. as well as to the bank’s age. Allen N. size. and to a lesser extent. R. in choosing a depository institution. Dick (published: 15 December 2007) Title: Demand estimation and consumer welfare in the banking industry This paper estimates a structural demand model for commercial bank deposit services in order to measure the effects on consumers given dramatic changes in bank services throughout US branching deregulation in the 1990s. to account fees. Rajeev Vashisht (15 Jul 2010) It depends on your risk profile. Cost economies of scope between bank deposits and loans have been found to be small.

their lending and deposit-taking may be two manifestations of one primitive function: the provision of liquidity on demand. and corporate sector securitized its debt. and its proximate causes. At present. and use a variety of data to test the model empirically. and increases the likelihood of bank failures. The study concludes by raising some questions. Manish (published: 1998) Title: Market Discipline by Depositors: A Summary of the Theoretical and Empirical Arguments Fifty-four banks failed in the first quarter of 1987. This policy reduces the effectiveness of depositor discipline. regardless of the size of their deposits. however. the policy removes the incentive for bank managers to limit risk-taking. first. depositors' assets must be exposed to some risk. so that depositors will have an incentive to check the soundness of the banks in which they have deposited their money. corporate physical investment and value added. despite a fall in ratio of corporate tax to gross profit. Explanations and Evidence This study. most of the regulatory proposals offered to control the growing number of bank failures are designed to encourage depositors to exert market discipline on bank officers and directors. providing essentially complete protection for all depositors. bank failure policy uses federal bailouts and arranged mergers for most failing banks. risky banks. There is no association between growth rates of the capital market mobilisation and aggregate saving rate.Title: India's Capital Market Growth: Trends. 1 Because bank failures are linked to bank risk. Anil K. There will be synergies between the two activities to the extent that both require banks to hold large balances of liquid assets: If deposit withdrawals and commitment takedowns are imperfectly correlated. Kashyap Raghuram Rajan (published: 2000) Title: Banks as Liquidity Providers: An Explanation for the Coexistence of Lending and Deposit-Taking What ties together the traditional commercial banking activities of deposit-taking and lending? We argue that since banks often lend via commitments. more than in any quarter since 1933. Long-term decline in the contribution of internal finance to corporate fixed investment and in profitability in 1980s are noted. thereby decreasing bank risk and lowering the incidence of bank failure. 2 For policies relying on depositor discipline to be effective. in effect subsidizing poorly managed. We develop this idea with a simple model. C. the two activities can share the costs of the liquid-asset stockpile. documents India's capital market boom. . What does it mean for the economy and private corporate sector? It is largely disintermediation: household sector substituted 'shares and debentures' for bank deposits. In addition.

we also find that the introduction of explicit deposit insurance tends to increase the share of insured deposits in banks' liabilities. Consistent with the model. SHARPE (published: 2004) Title: The Effect of Consumer Switching Costs on Prices: A Theory and its Application to the Bank Deposit Market If households face a cost of switching among Brands of a differentiated good. STEVEN A. In a stylised banking model we show that deposit insurance may reduce moral hazard. suggesting that explicit deposit insurance may serve as a commitment device to limit the safety net and permit monitoring by uninsured subordinated debt holders. We further find that credible limits to the safety net reduce risk taking of smaller banks with low charter values and sizeable subordinated debt shares only. . a positive effect on the level of deposit interest rates. the magnitude of this effect depends in some cases upon the degree of market concentration. Testing the model using EU bank level data yields evidence consistent with the model. debt-holder monitoring.Reint Gropp (published: 2001) Title: Deposit Insurance. the greater is the fraction of customers that move into or around the market. and risk taking. However. if deposit insurance credibly leaves out non-deposit creditors. I find that the amount of household migration in a market has a significant competitive influence on price markups. that is. I generalize this theory to a world with arbitrary market structure and test it empirically using panel data on bank retail deposit interest rates. Moral Hazard and Market Monitoring The paper analyses the relationship between deposit insurance. pricing is likely to be more competitive.

OBJECTIVE Primary Objective: The primary objective was to analysis the market and find out the potential customer who wants to invest their money in a share market or a fixed deposits of banks and what are the factore that influence or promote them to invest. illness . fixed deposits of banks and share market.  To do the comparative analysis of between these i.  To determine purpose of investment from the view point of investors. It also help to know about the need of the investors.e.  To study the share of fixed deposits of banks and share market.theft and other uncertainties they will happen in life suddenly and we cannot manage our expenses according to them. The need for the study of this topic is to know the present situation of the fixed deposits of banks and share market. Need of Study Risk and uncertainties are part of life’s and they will never stop like accident. . It is also important to find out the measures and to give the suggestions for the purpose of investments with respect to share market and fixed deposits of banks. We will invest our money for make a solution of big future expenses that can never change like higher education. Secondary Objectives  To analyze the preferred investment opportunities of the people.

Secondary data: The secondary data are those which are collected as: a) Internet b) Journals c) Magazines . Primary data 2. Primary data: The primary data are those which are collected as: a) Personal Interviews b) Observation method c) Questionnaires d) Schedules 2. Secondary data 1.Research methodology Research methodology which was use in market research qualitative and quantitative techniques. two types of data’s can be used: 1. While deciding about the method of data collection to be used for the study.

4 dealers 2. ICICI Bank 2. Punjab National Bank PRIVATE BANKS: 1. .Sample size of survey In relation to the study which is related to fixed deposits of banks and share market in India. 50 customers. HDFC Bank The researcher will visit: 1. For primary source we visited public and private banks: PUBLIC BANKS:1. State Bank Of India 2. The researcher will use primary as well as secondary sources of collection of data for that purpose.

A COMPARATIVE STUDY OF FIXED DEPOSITS OF BANKS & SHARE MARKET. . 2. INTERPRETATION & ANALYSIS. REVIEW OF THE LITERATURE. 5. 4.Proposed plan of the study 1. CONCLUSION & FINDINGS. INTRODUCTION. 3. http://www. http://www. hl=en&source=hp&q=fixed+deposits&btnG=Google+Search 5. http://www.scribd.REFERENCES hl=en&source=hp&q=fixed+deposits+of+banks+and+share+market&btnG=Goog le+Search hl=en&source=hp&q=share+market&btnG=Google+Search http://www.aspx http://www.