CHAPTER – I

INTRODUCTION

Savings and investments are playing a vital role in the economic development

of a country. Saving is the act of spending less than earned income, and placing the

remainder into a reserve account for later use. In economics, a country’s national

saving is the sum of private and public savings. It equals a nation's income minus

consumption, and the Government's taxes levied. Saving figures is an essential part

of the economy of any nation. A country’s savings are imperative requisites for its

economic development and to enable them to become a self–reliant country. The

need for consumption of domestic resources for financing development programs has

to be met by inducing the domestic savers to contribute their savings in productive

channels. In case domestic savings are insufficient, that has to be supplemented by

foreign savings, which has to be repaid by the future generation. Development

requires sacrifice in the form of restricting and delayed consumption to enforce a

higher rate of savings. Hence, it should be coupled with Government policies to

encourage and support the attraction of funds from the public.

For this purpose, the planners must have sufficient knowledge about an

individual’s capability regarding the magnitude of savings, the groups that save, the

route in which those savings are channelized, the motivational force operating for the

savings decisions. A country’s savings and investment propensities also play a

central role in economic growth or the degree of implementation of existing

economic resources. To enable the Indian economy to procure a high level of

savings, various measures were introduced by the Government and financial

organizations.

1
 Savings, therefore, are a crucial factor in achieving a high rate of investment

in various options available to the people. Money acts as the driving force for the

development of the country and individual progress.

The concept of small savings cannot be helpful for the individuals for the

reason that any money which was put inside a box cannot give any additional return,

but the money which was set aside as savings needs to be committed to any of the

investment channels which qualifies the necessary criteria for an investment. This

return benefits the individual savers and contributes to the country's development.

The post-liberalization era had opened up many new investment avenues for

the public to invest in private banks, foreign banks, mutual funds, and real estate

companies. The Reserve Bank of India drastically reduced the rate of interest on the

investments like Bank deposits and post office savings schemes as a result of this;

the investors were diverted towards an upcoming innovative saving scheme like

shares, real estate, and mutual funds. Nowadays, the younger generations are much

keen to invest in varied options if they get ample information and awareness on those

investment options.

Investment means the concept of delayed consumption, which involves

purchasing an asset either in financial or physical form or keeping funds in a bank

account to generate additional returns in future returns.

Indian financial system has a competitive and robust network of financial

institutions that were rated high by worldwide organizations. And it also facilitated

wide and varied investment choices and made reasonably available options for an

ordinary man to invest in his savings.

 The general concern and focus of the financial advisors and Government are

to see that every individual needs to invest and earn a good return on their idle

resources and generate a sum of money for a fixed goal in life and make a provision

for an uncertain future. An idea of the former pattern of household savings would be

supportive.

It has been projected that the rate of savings in the initial stages of growth of

present-day advanced economies remained nearly 20 % of their national income. A

study on the pattern of savings in Japan during the post-war period revealed that the

extremely high rate of capital formation in Japan resulted from a consistent standard

of savings of over 20 % throughout the period. With such a high percentage of

savings, Japan could easily surpass even some of the highly industrialized economies

of the west (Sinha, 1964). A study has been shown that Japan invested 31.8 % of its

GNP (at constant prices) between 1953 and 1972 during the same period, it was 25.1

% for west Germany,23%forFrance,20.2%forItaly,17.3%fortheUKand17.0

% for the USA.

On presenting the Central Budget for the year 1962-63, the Union Finance

Minister of India observed that all types of savings were necessary to strengthen our

Plan. Whether they are large or small, put in banks or insurance policies or

Government securities or small savings schemes or provident funds.

Further, he added that, if the volume of savings was adequate, the task of

allocating different sectors according to the priorities of our plan would not be

difficult. To such a great extent, the budget was concerned with savings rather than

taxation (compulsory savings). In his Budget Speech, the Finance Minister has pin-

pointed that one of the key objectives of our economic and fiscal policy is to

generate savings among both the individuals and the corporate bodies.
 The interest shown by the executives and the legislators in savings indicated

that the saving is of great importance in a welfare state. The volume of aggregate

saving is made up of private savings by individuals or businesses, saving by

companies, and public conservation by the Government. This structure may vary

from country to country as well as from time to time in the same region. In the self-

governing welfare states like the United Kingdom, France, and Sweden, the

contribution of corporate and Government savings to the total savings were more

than 60 percent whereas, in India, Canada and Japan individuals' savings were more,

especially in India it was more than 80 percent. This indicated that the higher

percentage of corporate savings was due to high industrialization. The reason for

fewer Government savings in welfare states like India was that they had invested a

large number of social services and social well-being by borrowing on a large scale.

People as individuals need to save not only to meet emergencies and uncertainties in

the future but also to maintain their status in society.

Household (Individual) Investment

The household sector represented by individuals occupied a strategic place on

various economic units in a country as it contributes substantially to a country’s

domestic savings. Understanding the savings behavior of this sector made

importance in devising appropriate saving policies.

The word saving implied that the residual money that was available for a

person for his investment after meeting all his consumption expenses. The individual

investor can provide funds to the finance schemes either by participating in its equity

or by subscribing to its debt instruments.

 The importance of the individual investor can be precisely learned from the

fact that the national aggregate savings of India come from three sectors, namely the

household sector, corporate sector, and the public sector. Indian public sector was

not making any significant savings after liberalization, and this dis-saving pattern

continued until 2002-03.

The contribution of the private corporate sector to national savings was only

around 15 to 17 percent. The industry which was contributing very significantly to

the nationwide savings was household savings. Their contribution was more than 75

% all along. In no other country in the world, the household sector has been saved to

this extent. For example, China's saving rate (GDS) was 42 % of GDP which was

higher than India's savings rate, but the household savings rate of China was only 16

% which was lesser by 6 % than India. Depending too much on external resources

was a risky affair, and expecting much from the public sector would not yield the

desired result. Though the operational performances of the corporate sector were

excellent in recent years, their aggregate savings was not above 17 % of GDS.

Hence, the only dependable sector for fund transformation of a country’s

development was the household sector.

Disposable income was the important determinant of savings. The people can

save only from money which was under their disposal — information about

household saving rates as a percentage of disposable income for different countries.

Indians have a higher share of savings from their disposable income. No country,

whether developed or developing, was closer to the Indian household savings rate.
 The inflation rate, which will have a direct bearing on consumption, which in

turn affects the level of saving, was high in India when compared with other

countries like China. Despite this, Indian households make massive savings. The

puzzling phenomenon was that although our country finds a place among the lowest

group of countries in terms of per capita income (Rs.23241 for 2004-05 per annum),

yet it was on par with the middle income or some high income industrialized

countries in the savings rate.

The question that arises here was that how a country, whose per capita

income was among the lowest, can affect the savings rate which according to the

economic theorists, was achievable only after breaking the vicious circle of poverty

or underemployment.

The Former Patterns of Indian Household Savings

Domestic saving primarily consists of three components, viz., household

sector, private corporate sector, and public sector savings. The household sector

saving constitutes the most significant portion of gross domestic saving which is

much relevant in the context of research. Household sector saving comprises saving

in financial assets and saving in physical assets.

Gross financial saving of the household sector includes the saving in the form

of currency, bank deposits, and non-bank deposits, saving in life insurance fund,

saving in provident and pension fund, claims on Government, shares, and debentures

inclusive of investment in mutual fund units.

Gross domestic savings in India had shown a steady and substantial rise from

the 1950s along with the increase in per capita income. The overall savings rate and

the household savings rate took a sharp upturn in the 1970s, marginally increased

after that, and then again took an improvement from the 1980s.
 The second expansion from the mid-1980s to the present can be attributed to

the Economic Reforms initiated in 1985 and after that accentuated from 1991. The

years 1984-85 to 1995-96 were a remarkable phase of growth of the Indian economy.

The jump in savings rate only substantiated the hypothesis that economic

liberalization promoted savings through economic growth which resulted in the act

of investment by the households.

India has reported 33.7% gross domestic savings as a percentage of Gross

Domestic Product (GDP) in the fiscal year 2018 as its economy picked up a faster

rate following the economic slowdown in the year 2017. The economic downturn in

the year 2009 saw the gross domestic savings falling to 32.2% of the GDP, which

was 36.9% previously in the year 2008. This increase in gross domestic savings

augurs well for the expansion of the Indian economy. The high saving rate had been

one of the key sources of investment capital in Asia, providing funds for capital

formation.

Rising saving rates correspond to substantial improvements in gross capital

formation, which rose to Rs. 23, 892 billion in 2013-2015 from Rs. 19, 271 billion

the previous fiscal year.

But the attention has to be drawn to household share of gross domestic

savings that had declined from 74% to 69.6% of total gross domestic savings. The

household savings revealed a striking feature of the years the 2000s in the general

leveling off the household savings rate at about 23% from around the middle of the

decade. This was in contrast to the upward movement in the previous years, followed

by private corporate savings with 24.1% and public savings with 6.3% of gross

domestic savings during the year 2016 - 2017.

 India's savings performance had been quite impressive in a cross-country

context. India's gross domestic savings rate in the modern period was comparable

with countries like Indonesia, Thailand, and Korea. Still, it tends to be much lower

than that of China, Malaysia, and Singapore. The degree of increase in the domestic

savings rate in India and China during the year 2013 - 2015 was on the increasing

trend.

The position of this category of savings in India was examined below vide

Table 1.1, to have a broader view among different countries and years.

Table 1.1

Gross Domestic Savings Rate (% of GDP)

Country 2011 2012 2013 2014 2015 2016 2017

India* 22.8 24.4 23.7 33.5 36.9 32.0 33.8

China 39.1 43.5 37.5 47.6 50.5 51.8 52.1

Indonesia 32.3 30.6 32.8 29.2 29.0 28.9 33.8

Malaysia 34.5 39.7 46.1 42.8 42.1 42.3 36.0

Pakistan 11.1 15.8 16.0 15.2 15.4 20.8 11.4

Sri Lanka 14.3 15.3 17.4 17.9 17.6 13.9 18.0

Thailand 3.8 5.4 1.5 0.3 4.8 1.5 2.4

Source: World Development Indicators 2011, World Bank.

It was in this proper context; guidance was needed for the domestic savers to

reciprocate their previous losses into gains and to go forward with a sustainable

positive increase in comparison with other countries.

 It would help the economic downturn to revive back by providing ample

opportunities for the country by channelizing their savings to proper investment

avenues. For this to happen, every individual needs to look on to their investment

pattern and be convinced to advocate an alteration wherein the affirmed

understanding will bring in constructive benefits as a whole for the economy and the

investor. To make it clear, the household sector savings to be efficient lies in the

attitude, perception, and wise distribution of the investable asset. As the other sectors

cannot contribute much to the national savings, the household sector represented by

individual investors occupied a pivotal position in the Indian economy.

Household Sector Savings-Status Report

Regarding domestic savings, the projections for the recent years and

estimation for the future are given below vide Table 1.2.

The table shows that the projected household savings rate may increase from

% during the year 2011-12 to 25.2 % during the year

2016-17, giving an average of 24.4 % during the Twelfth Five

Year Plan. If the rate tends to be much slower, some stringent

measures would have been taken by the policymakers to make

a difference and improve the average to some possible extent.

It would be possible only through some drastic change in the

distribution of financial and physical assets. But this needs a

clear understanding of the need for investment strategy and

also the present trend.

 Table 1.2
Projection of Household Savings Rate (in percent of GDP)

2011- 2012- 2013- 2014- 2015- 2016- 12th Plan

Year
12 13 14 15 16 17 Average

Household
23.2 23.6 24.0 24.4 24.8 25.2 24.4
savings rate

Source: RBI Report - Working Group on Savings during the Twelfth Five-Year Plan
(2012-13 to 2016-17)
Need for an Effective Investment Strategy; a well-planned investment

strategy was essential before embarking on any investment decision. As the return on

investment was not always clear, the investors prepare the strategy to face the

ongoing challenges in the investment arena.

The investment strategy was usually considered to be more of a branch of

finance than economics. It was defined as a set of rules, a positive behaviour or

procedure guiding an investor to choose his investment portfolio.

An investment strategy was centered on a risk-return trade-off for a potential

investor. High return investments, such as real estate and mutual funds, usually have

more risks associated with them rather than low return-low risk investment options.

Return on investment can be measured on past or current investment or the estimated

return on future investment. These could be done using simple applications

facilitating any person who was a beginner in the area of investment. The

requirement was only a simple understanding and logical approach while strategizing

the investment plan.

A balanced investment strategy generally required the process of investment,

which comprises of a long time planning and some risk tolerance measure.
 In case, when a strategy was aggressive in enforcement, the chance of

attaining a higher goal is brighter. An efficient approach can be obtained from the

portfolio theory, which shows a reasonable estimate of the risk and returns.

Need for an Effective Investment Strategy

A well-planned investment strategy was essential before embarking on any

investment decision. As the return on investment was not always clear, the investors

prepare the strategy to face the ongoing challenges in the investment arena.

The investment strategy was usually considered to be more of a branch of

finance than economics. It was defined as a set of rules, a positive behaviour or

procedure guiding an investor to choose his investment portfolio. An investment

strategy was centered on a risk-return trade-off for a potential investor.

High return investments such as real estate and mutual funds usually have

more risks associated with them rather than low return-low risk investment

prospects.

INVESTMENT AVENUES

SAVINGS

Savings means the amount of money that was kept aside from the current

income for future use. People can save money by continuing apart from their revenue

every month and this was possible by avoiding the unwanted expenditure, generating

higher income, and by doing them both.

INVESTMENT

The action to invest money in for-profit and to secure growth in the future

can be termed as an investment. It was a sacrifice from current income to gain

returns at a later stage. Investment should be made to yield more return than the rate

of inflation. The money, once consumed, was gone forever, whereas the savings

bears fruit. The primary element of any investment was time and risk. It purely

depends upon the individual capacity to give importance to either of the two aspects,

based on one's needs.

INVESTMENT BEHAVIOUR

Investment behaviour denotes the attitude, perception, and willingness of the

persons and institutions while investing their savings in different types of financial

assets. Generally, an investor’s objectives would be the following:

• To minimize the risk

• To maximize the returns

• To hedge against inflation

• Liquidity

NEEDS OF WEALTHY INVESTORS

Wealthy investors being aware of the emerging investment opportunities use

sophisticated investment strategies such as:

 • We are leveraging the professional advisors' capability to analyze market

trends and make the appropriate investment.

• Searching for innovative products to enhance the value

• Diversifying across various types of assets

• Investing across emerging geographies

• Consolidating financial information and assets.

• Young, educated, and knowledgeable

• Smart looking for the best deal

• Willing to take risk

• Well informed about global trends

• Seeks information from various sources

SIGNIFICANCE OF SAVING

Economic development for the comfortable life of people and financial

organizations, saving was significant and an essential one. The main motives behind

the savings seem to be the following:

• Provisions for the future, when income was expected to be less or the need

for expenditure.

• Provisions against an unpredictable decline in income.

• Acquisition of higher income either by improving business or by obtaining

interest, dividends, rent, or other property income.

• Gain in social status by acquiring property

FOR ECONOMIC DEVELOPMENT

Saving leads to an increase in the national income of a country by increasing

the level of investment. To attain economic development, the national income of a

country should be high. Savings are vital to the development of an economy. An

increase in private savings helps to keep the economy in equilibrium by releasing

resources for exports and additional investment, both at home and overseas.

FOR PEOPLE

The future was an unpredictable one, so to get the future requirements of

money, saving was essential. This was possible only when they keep their money in

banks or financial organizations. The requirements may be in the form of

unavoidable expenses, medical expenses, expenses for social functions, educational

and marriage expenses, and so on. Without savings, an ordinary man cannot cover all

these expenses at a time. They need not allocate a large amount of their income, but

they should allocate a small portion of their income regularly. There were several

ways to save money.

FOR INVESTMENT

The investment was the sacrifice of resenting value for the uncertain future

reward. It entails arriving at numerous decisions such as type, mix, amount, timing,

and grade. An investment decision was trade between risk and return. All investment

choices were made at points of time under the personal investment ends and in

contemplation of an uncertain future. Investing successfully; one should have an

investment and personal investment objectives like having a home, creating a regular

income after retirement, possessing money for the marriage of one’s children, and

the likes. It must also be ensured that the purchasing power of the money saved was

not less than its present purchasing power.

FOR THE BANKERS

The amount deposited by the public and business concerns in banks also gets

converted into investments or savings. The saving was created in the form of various

deposits of accounts in the banks. Thus, these investments were indirectly helpful to

increase national income. Moreover, the savings will be beneficial to create smooth

functioning or circulation of money. i.e., the deposits which were made by the public

are used for lending.

AVAILABLE INVESTMENT OPTIONS

There were a large number of investment options available today to make our

lives easier. Some of them are marketable and liquid while others are non-

marketable and some of them are also highly risky, while others were almost

riskless. People have to choose Proper Avenue among them, depending upon their

specific need, risk preference, and return expected. Investment avenues can be

broadly classified under the following heads.

 Equity

 Bank fixed deposits

 Company FixedDeposit

 CorporateDebenture

 Public provident fund

 Post Office –NSC

 Life Insurance

 Mutual Fund

 RealEstate

 Gold / Silver
 According to Benjamin Graham, investment was a security purchase that

promises the safety of the principal and a reasonable return. So, knowledge of

different avenues of investment enables the investor to choose investment wisely.

Bank Deposits

Among investments, deposits with banks are more popular. Banks have

introduced different types of deposit account with various facilities and privileges.

Bank deposits are (a) Savings deposits account (b) Fixed deposits account (c)

Recurring deposits and (d) Current accounts.

Savings Deposits Account: A person who intended to open a savings Bank

account should fill up a printed form supplied by the bank and submit it duly filled to

the bank concerned. He/she should indicate in the application form the references

with the help of which the banker enquires the honesty and integrity of the applicant.

Current Account: An existing account is a running account. The amount is

paid into and drawn out continuously from this account. This account was operated

mainly by business enterprises, public bodies, corporations, industrial enterprises,

trustees, etc.

Recurring deposits: In the recurring deposit account, the investor pays a

specified amount every month for a stipulated period. After the lapse of the period,

the amount accumulated in the account along with interest accrued thereon will be

paid back to the investor.

Fixed Deposit Schemes: The fixed deposit was a deposit with the bank for a

fixed period which is specified at the time of making the deposit. The period of the

deposit varies from 15 days to 120 months, and the minimum period is seven days

for deposits of Rs. 25 Lakhs and above.

 Novel Deposit Schemes: Apart from the above traditional deposit schemes,

banks offer novel or innovative savings schemes to attract investors.

Post office

Postal Department was the very oldest and largest department in our country.

Also, it can be hailed as one of the monopoly departments. It was one of the

departments helpful for the savings and investment mobilization in the country. The

post office has different savings and investment schemes.

The post office was at reach in every village people save their excess money

in the post office through different deposit schemes. The excess amount of the

people was immediately deposited in the post office because it was nearer to their

houses.

The post office provides different schemes with tax exemption. Postal

departments issue different savings certificates:

• Post office cash certificates (5years)

• Post office National Savings certificates (12years/7year)

• Post office BankAccount

• Post office cumulative time deposit account

• National Savings certificate VI and VIIIissue

Generally, post office schemes are also like commercial bank schemes.

Originally an institution called "Trustee savings banks" was operating the savings

bank account. These institutions became extinct gradually and the "Postal savings

account". Various Post office schemes proved to be attractive for the investors who

gave utmost importance to the safety aspect.

 • Post Office Monthly IncomeScheme(POMIS)

• Kisan Vikas Patra(KVP)

• National SavingCertificate

• Public provident fund

• Post Office Time Deposits(POTD)

• Post Office Recurring Deposit(PORD)

• Deposit Schemes For retired Government Employees

• Post Office Savings Account(POSA)

• Savings Schemes For senior citizens

Provident Fund

The word "Provident" means timely preparation for the future. This fund was

deducted from the salary of the employee every month. There are four types of

Provident Fund Schemes such as:

• Statutory ProvidentFund

• Recognized ProvidentFund

• Unrecognized ProvidentFund

• Public provident fund

Statutory Provident Fund

It was a provident fund to which the Indian Fund Act, 1925 applies.

Generally, this provident fund was maintained by Government or semi-Government

offices like local authorities, universities other recognized educational institutions,

statutory corporations and nationalized banks, etc.

Recognized Provident Fund

It was a fund to which the Provident Fund Act, 1952 applies. Under this

scheme, any person who employs 20 or more employees was under an obligation to

register his firm or organization under the Provident Fund Scheme for the employees

in his organization. It was after three years of its establishment that the registration

should be done under this Act.

Unrecognized Provident Fund

This fund was neither statutory nor recognized. It was approved by

the provident fund commissions but not by the commissions of income tax.

Public Provident Fund

The public provident fund scheme was started on 1st July 1968 and every

individual (Including a salaried employee) can subscribe to this fund any amount

being not less than Rs. 500 and not more than Rs.70, 000 in a year.

Shares and

Securities Shares

The capital of the company was divided into different units with definite

values and the units are called shares. Holders of these shares are called

shareholders. There are two types of shares:

• Preferential shares

• EquityShares
Meaning of security

The term ‘Security' has not been defined in the Act. However, in common

parlance, the term ‘Security' means a documented acknowledgment of the debt taken

by the Government or some other authority from the general public. It was held by

an investor or creditors as a guarantee of his right to receive his payment. The

following securities are available:

Tax – free Government securities

These securities are those, the interest on which was fully exempted from tax

under section 10 (15). Interest on such securities was neither included in total income

nor it was taxed.

Less – Tax Government Securities

Such securities were issued either by the Central Government or a State

government. These are taxable securities, but no tax was deducted at the source of

securities.

Tax–Free Securities

These were issued by the local authority or statutory corporation or

Commercial securities in the form of debentures or bonds. Speaking their interest

was not free, because tax due on this interest was payable by the commercial

securities or local authority or corporation concerned. These were called tax-free

because the tax assessed has not to pay tax on it from his pocket.
Less – Tax Commercial Securities

These may be called taxable security. In the case of these securities, income

tax was deducted at source on the amount of interest calculated at the percentage

dated on the securities, and the balance of the aforesaid income tax was paid to the

security – holder.

Money market Instrument

This instrument is usually traded, at a discount, in organized markets; the

discount was dependent upon the interest rate and the time remaining to maturity.

• T-Bills

• Commercial paper

• Certificated ofDeposit

• Bonds andDebentures

• State and municipal government bonds

• Corporatebonds

• Internationalbonds

• Convertiblebonds

• Private sectordebentures

Mutual fund Schemes

The market was littered with the wreckage left behind a couple of years ago

by the first wave of mutual funds. However, armed with investor-friendly packages

and the four corporate majors: The Tata group, the Birla group, the Reliance group,

and the Stock Exchange Board of India have entered into these treacherous shores

known for burnt fingers. Then returns with handsome rewards.

Life Insurance Corporation

Insurance businesses bypassing the "Insurance Act" in 1912. The Insurance

act comprehensively amended and passed as a new Act in 1938 for controlling the

investment of funds, expenditure, and management. By the year 1955,

approximately 170 insurance offices and 80 provident fund societies had been

registered for transacting life assurance business in India.

In 1956, the Government of India decided to nationalize the life assurance

business in India. The first step in the direction was taken by issuing the life

insurance [Emergency provisions] ordinance, on 19th January 1956.

Schemes of LIC

• Whole life assurance plan

• Endowment Assurance plan

• Jeevan Saral

• Money back policy

• Bima PlusPlan

Non-Banking Financial Companies (NBFCs)

Non-banking financial companies (NBFCs) provide a wide range of financial

services such as leasing and merchant banking. Non-Building Financial companies

and their number continue to grow by about 4000 per year. The RBI Annual Report

for the year 1996-97 gives some interest statistics regarding the financial position of

non-banking financial companies. During the year 1995-96, the aggregate deposits

of about 12,530 non-banking financial companies come to Rs. 2, 95, 340 Crores as

compared to Rs. 2, 23, 390 Crores in the previous year showing a marked increase of

nearly 19 percent.
Chit funds

A chit fund was a type of rotating money and credit association system

practiced in India. It may be organized by the financial institution, or informally

among friends, relatives, or neighbors. The various types of chit funds are as

follows:

1. SimpleChit

In this system, members contribute a specified amount regularly for a

specified period, and lots are drawn to pick up the winning chit-holders. Everyone

will get the whole amount sometime or the other there was no promoter or foreman

in this case.

2. Prizechit

In this system, which was a form of Henry, a promoter or foremen collects

periodical amounts from a specified number of subscribers. Periodically a prize

winner was picked up by a lot who gets the prize and then gets out the chit.

3. Business chit

In this system, a promoter or foremen collects subscriptions and arranges to

distribute the amount through actions, the amount of discount was distributed among

the non-bidders. The foremen may get a fixed discount and or may also take the

entire chit amount at the first or second installment. As the simple chit has no

intermediary and the prize chit was essentially a lottery scheme.

The chit funds were popular at one time in Tamil Nadu and Kerala, have now

been spread to North India also. An individual who joins a chit fund do so either to

get a return on his savings or get a prize at the action.

Real Investment

Investment in fixed assets was one of the best savings and investment

methods for individuals. Fixed assets are in the form of land, buildings, agricultural

land, plots for the house, apartment, etc. These are described below:

1. Land

Acquiring land was one of the means of fixed assets. The land was the "Gift

of Nature". The land on any account cannot be extended by any means.

In other ways, any land was worthier depending upon the wealth and its

fertility. Some land was fertile and useful, while some land has wealth underneath,

i.e. the Kimberly in Africa have more extensive deposits of Diamond and the Gulf

countries have several oil wells which increases the national income of their country.

2. agricultural land

Some people invested in agricultural land and this fertile agricultural land

gives more returns. Agriculture was the backbone of the Indian Economy. So the

Government also provided many facilities for improving modern agriculture. Our

Government and Nationalized Banks provided such schemes as small level crop

loans, loans for purchasing seeds, fertilizer, etc. On larger level loans such as

purchasing a tractor and other agricultural instruments etc. were provided.

3. Plots

Nowadays, the agricultural land situated in urban areas was divided and

utilized to build houses. House was a building made for people to live in. House was

a place where an individual spends most of his life. The social significance of hosing

lies as a means of changing.

4. Buildings

Investing in the building was one of the fixed assets. Hence building for

housing purposes and industrial purposes are done. In recent days the urban area was

promoting many flats systems. The flats were considered as one of the fixed assets.

In Delhi, Mumbai, Chennai, and Pune were private builders who constructed

secured flats and multi-storied buildings. The flats were sold out to different persons

on the conditions that the purchase would come from a cooperative society,

nationalized banks, Life Insurance Corporation and Urban Development Corporation

(HUDCO), etc.

Gold

Indian invests its money in the form of Gold. In recent days the rate of Gold

was increasing rapidly. In our country, people have a craze for Gold and invested in

the form of ornaments in large quantities. Gold was imported to India from other

countries. Saving the utility of Gold was higher in our country. Hence, Gold was one

of the means, which was considered as a movable asset for investment. Since earlier

times, Gold has always been held in high esteem partly because of its scarcity. It was

a very precious metal. Before the introduction of paper currency after the Barter

system, we have used Gold as the exchange value of goods. It includes precious

stones and art objects.

Definition of Gold Standard Act of 1952

The Gold Standard Act refers to the monetary system in which gold acts as

the standard of value in the sense that the country's monetary units are either made

of Gold of specified weight and purity of its value was quite unambiguously defined

in terms of certain specified weight of Gold of specified purity.

 According to Crowther, the gold standard was “a device for maintaining the

stability of exchange rate”.

According to Robertson, “gold standard was a state of affairs in which a

country keeps the value of its monetary unit and the value of a defined weight of

Gold at on equality with one another”.

Kinds of Gold Standard

1. Gold coin standard

Which was in vogue in the world in the pre-1914 period, all types of money

are redeemable at par in full-bodied gold coins. There was a free market in Gold,

and there was free coinage of Gold. Since gold coins were in circulation, the public

was free to exchange other means of these coins. The country's monetary unit was

defined in terms of the specific quantity of Gold of specified purity.

2. Gold bullion standard

The gold bullion standard, which was largely adopted in the post-war period,

differs from the gold coin standard in two important respects; first, no gold coin was

in actual circulation. Second, the monetary authority was still under a legal

obligation to sell Gold to the public at the official price, it was sold. Gold in the form

of bars with the result that for the common man not possessing enough money to

purchase the minimum quantity of gold in the form of gold bar and the convertibility

of each money unit into gold was virtually denied although theoretically speaking

the money unit of the country was still convertible into gold. The gold bullion

standard was denounced by the French people as the "rich man's standard" since the

poor could never aspire to convert their small money holding into gold which could

be only in the form of gold bars where the price of each bar being officially fixed

and the minimum quantity of gold to be purchased being fixed at one gold bar.
 The Government issued some old Bonds

6 ½ % Gold Bonds during the year 1977, 7% Gold Bonds during the year

1980, National Defense Gold Bonds during the year 1980 was issued by the central

Government. Gold Deposit Bonds issued under the Gold Deposit scheme during the

year 2000 were notified by the Central Government.

The above savings and investment institutions were helpful to people to save

and invest their money. At the same time, individuals must identify the institution

which one was a Government institution, and which one was recognized by the

Government like that while one was giving benefits securities, and tax relief

available from the above institutions. Who was the cheating fellow among the

institutions?

STATEMENT OF THE PROBLEM

Savings potential and investment capacity help to achieve the economic

development of the nation. Savings potential and savings patterns depend on

expenditure made by the individual. Investment behaviour and attitude of the

investors based on awareness, availability, and accessibility of the investment

opportunities.

People were saving money to eliminate financial risk and to encounter their

financial requirements of the future. The future needs of money cannot be predicted

very correctly. To enjoy the benefits, safeguard money, and maintain regular

activity, everyone should save. In this study, an attempt was made to analyze the

savings and investment patterns of college teachers in Tamilnadu.

Even though people were drawn towards these innovative avenues of

investment, the knowledge which they have was not consistent about all the avenues

of investment available.
 This makes them lean on professional advisors. Most of the financial

advisors were competent, but even there were minimal sections of them too keen on

exploiting the gullible investors with pecuniary motives.

The Reserve Bank of India's Annual Report for the year 2010-11 had

explained that the decline of the net financial savings rate of the household segment

was reflected in the slower growth in household savings in bank deposits and life

insurance funds. Along with this trend, there was an absolute decline in investment

in shares and debentures, mainly driven by the redemption of mutual fund units. But,

there was a shift in favor of small savings and currency during the above year.

In the present day context, it was understood that almost all salaried class

people plan to invest their money in different investment avenues available to avoid

tax burden, to meet future needs like education which has become the costly affair

and marriage of their children, to ensure the safety of funds and to meet some

specific emergencies.

The predominant motive for selecting the college teachers working in arts

and science colleges residing in Tamil Nadu was that the cost of living was

comparatively low and expenditure involved for meeting family commitments was

moderate in Tamil Nadu when compared to other metropolitan cities. For this

reason, the percentage of savings could be possibly high for this group. The

immediate focus on this area would result in perhaps creating awareness to initiate

funds flow into appropriate investment options. The college teachers have a regular

income, and it was very essential for them to do tax planning for their income to

avoid paying a higher amount of taxes. Most of them come under the purview of

taxation, and therefore they opt for investing their surplus funds in escaping from the

tax net.
 The respondents may belong to different institutions, and the environment in

which they work may differ, but the main driving force was not only investing the

funds for safety, but they also want their investment to yield an excellent return.

This had made people go crazy behind various organizations and firms to

park their investments. It was observed that within a short period, many finance

companies, investment companies, banks, foreign entities, and other investment

avenues had a mushroom growth in the country. Some of them were found to be

spurious and were found to exploit the ignorance of the people regarding

investments of funds.

Even highly educated people who were informed in all other areas, lack

knowledge in the field of finance and investment. Probably they do not know the

approach to choose specific investment alternatives to be included in their

investment pattern.

It has been strongly felt that proper guidance was needed to be given for the

college teachers in this specific area as it does not only pertains to an individual's

income and returns but was also associated with wealth creation and nation-building.

Each college teacher needs to be well informed in taking efforts to frame or reframe

their investment patterns with an appropriate combination of financial and physical

assets. Many times they go on by their intuition or by the strategies followed by their

friends or relatives or the one given by the professional advisor, which may not be

successful at all times.

Another reason for taking up the investment pattern of the college teachers

for the study was that in the present condition, their number was tremendously

significant and also likely to increase shortly.

 Being an enlightened community, they need to have a very high level of

awareness and exposure relating to the investment options available, which was

found to be lacking in them.

The major objective of this study was to discover the pattern of investment

adopted by the college teachers and elucidate their expectations to make such

investors achieve their investment objectives. This study would help many of the

college teachers who want to know a balanced method to have a better, safe, and

profitable investment portfolio. Hence the study was entitled "An Empirical

Investigation on Investment Behaviour of College Teachers in Tamilnadu".

SCOPE OF THE STUDY

The study would facilitate us to understand the basic reasons which were

behind the growth of such a large number of financial institutions all over the

country and again would explain the rationale as to why people are much eager to

make investments with such institutions and many times are getting affected by the

aspect of risk.

The study would help to gain a better understanding of the expectations an

investor looks for in an investment option. It could be used by the financial sector in

designing better financial instruments customized to suit the needs of this group of

respondents according to their varied needs and expectations, taking into

consideration their investment pattern. It will also help the agents, executives, and

brokers in marketing the existing financial instruments. It will provide knowledge to

the investors about the various financial services provided by the company. This

would also help the financial institutions to understand the requirement and

expectations of different categories of investors.

 These beneficial aspects had motivated for a thorough study in the form of

research, to find answers for questions relating to investment strategies, views on

different investment options, the minute details considered by the respondents before

including the investment alternatives in their investment portfolio.

This study would facilitate in analyzing the investment pattern or technically

speaking “Portfolio Management” of the highly educated members of the society.

This study would be of immense help to the Government policymakers,

administrators, banks, and other financial institutions in the country. It would be

highly beneficial to the academic community in the universities and also proved to

be a guiding factor to the small investors in their investment decisions. It would be

also highly useful for laymen and future researchers who may likely start from

where this studies where it stops.

OBJECTIVES OF THE STUDY

The following are the objectives of the study:

1. To study the existing investment pattern of the college teachers

2. To explore the profile of the respondents and their attitude towards

investment

3. To analyze the significant factors being considered for investment

attitudes

4. To study the perception of the investors towards investment avenues

of college teachers

5. To measure risk and return on investment of College Teachers.

6. To summarize the findings and suggestions to the policymakers in the

context of expectations of investors while they choose their

investment alternative.
 HYPOTHESES

H01: There is no significant difference between personal profiles and

opinions of college teachers towards the factors considered by them for the

investment decision.

H02: There are no significant differences between the opinion scores about

investment alternatives among the group of respondents based on their profile.

LIMITATIONS OF THE STUDY

Despite its strengths and uniqueness, the study was hedged with certain

restrictions. They were:

 The study was restricted only to the Chennai, Thiruvallur, and Kanchipuram

districts of Tamilnadu.

 The findings were restricted to a small group of college teachers working in

the districts and may not represent the whole universe.

 This study pertains to a specific period and place and may apply to other

periods and places if similar conditions exist in a particular time and place.

SCHEME OF THE STUDY REPORT

The report of the study was organized and presented in six chapters.

The first chapter forms the introduction and design of the study, which

consists of the introduction, statement of the problem, significance of the study,

methodology, and design of the study, limitations, and chapter scheme.

The second chapter was the Review of Literature, which includes previous

studies on investment behavior in various aspects of the experts' opinion.

The third, fourth and fifth chapter of the analysis was on savings and
investment options of college teachers in the study area were attempted. The

discussions in these chapters were related to the investment pattern of the investor,

various aspects that motivate them to choose an investment option, detailed

information, and present trends about the seven investment alternatives taken for the

study and measuring the attitude of investors through the scaling techniques.

The sixth chapter comprises the summary of findings, the conclusion from

the study, and suggestions to the investors, financial institutions, and policymakers.