Strike a healthy ratio of savings, deposits and assets, against your expenses and liabilities.Strike a healthy ratio of savings, deposits and assets, against your expenses and liabilities.

It is true that day by day the rich are getting richer, the poor are getting poorer and the middle classes getting squeezed out in between because poor spend more on a bunch of stuffs, and middle classes buy more liabilities that costs them and rich and wealthy buy assets which pays them later on.

Typically, cultivating saving and deposit habit is inevitable for almost all category of people and have no boundary on the basis of their gender, attained age, income level, occupation and many other demographic features. But here point to be noted is that ‘Involvement of only bank and financial institution in doing so is not satisfactory; rather the government, the regulatory body and the financial intermediary should go hand in hand to reach the overall population’ says Mr. Jeevan Bhattarai, Deputy Chief Executive Officer of Century Commercial Bank Ltd.

So, it worth making a rational decision to purchase assets i.e. deposits which brings in regular cash flows  in the form of interests and helps to reap financial benefits specially at this point of time than that of investing in expenses and liabilities.

Technically, deposits and savings are liabilities for depository institutions like bank and insurance companies whereas they are the assets for depositors. So, this assets can be considered as a good investment portfolio for people who are aimed to achieve a sound financial goal in both short term and long term period of time.

It is very simple and important too to invest on such kind of assets because that might change the way of our life. It is true that day by day the rich are getting richer, the poor are getting poorer and the middle classes getting squeezed out in between because poor spend more on a bunch of stuffs, and middle classes buy more liabilities that costs them and rich and wealthy buy assets which pays them later on.

Bank Deposits in a nutshell

Sources of emergency fund

Whenever we confront with unforeseen events like sickness, accident and natural calamities, it serves as a primary sources of fund because it’s the time when we lose our existing job as well as the income, incurs more medical and living expenses and so on. For instance, during the devastating earthquake of April 25, most of individuals and households were dependent on their past saving for survival since the situation was not favorable to continue with the existing job. So, it wouldn’t be possible to survive without having excess to that emergency fund. Now it’s time to rethink about the liquidity risk that we might face in future and put the substantial amount for that emergency fund as a risk management tool.

A backbone for economy

It channelizes funds from surplus units to deficit units in the economy. There is a win-win situation for both the party. In one hand, needy one will get access to the fund and mobilize it in a productive and lucrative business sector and thereby helps to create employment opportunity and increases the overall Gross Domestic Product (GDP) of the nation. On the other hand, people with excess fund will get an opportunity to invest on portfolio which is safe and generate regular cash flows as well.   

Provision of Deposit Insurance

Still, people go for community based deposit institution like co- operative because of higher interest rate provided by them and the income source disclosure requirement in commercial banking system while making a deposit. But according to Mr. Bhattarai, it is recommended to go for commercial bank because sometimes the greed of that small interest would lead to loss of principal as well. And there is a witness of failure for such kind of depository institution in the history.

But it is not the case in commercial bank, here they provide deposit insurance for up to 2 lakhs in collaboration of Nepal Rastra Bank. 

Short- term and long term investment

Here bank deposit having tenure of less than one year is regarded as a short term investment and tenure of more than one year is long term investment. Importantly, the longer the tenure, the higher the rate of interest for depositor. Mr. Bhattarai also recommends to have at least 25 % saving in fixed deposit because it is the kind of force saving.Typically, cultivating saving and deposit habit is inevitable for almost all category of people and have no boundary on the basis of their gender, attained age, income level, occupation and many other demographic features. But here point to be noted is that ‘Involvement of only bank and financial institution in doing so is not satisfactory; rather the government, the regulatory body and the financial intermediary should go hand in hand to reach the overall population’ says Mr. Jeevan Bhattarai, Deputy Chief Executive Officer of Century Commercial Bank Ltd.

So, it worth making a rational decision to purchase assets i.e. deposits which brings in regular cash flows  in the form of interests and helps to reap financial benefits specially at this point of time than that of investing in expenses and liabilities.

Technically, deposits and savings are liabilities for depository institutions like bank and insurance companies whereas they are the assets for depositors. So, this assets can be considered as a good investment portfolio for people who are aimed to achieve a sound financial goal in both short term and long term period of time.

It is very simple and important too to invest on such kind of assets because that might change the way of our life. It is true that day by day the rich are getting richer, the poor are getting poorer and the middle classes getting squeezed out in between because poor spend more on a bunch of stuffs, and middle classes buy more liabilities that costs them and rich and wealthy buy assets which pays them later on.

Bank Deposits in a nutshell

Sources of emergency fund

Whenever we confront with unforeseen events like sickness, accident and natural calamities, it serves as a primary sources of fund because it’s the time when we lose our existing job as well as the income, incurs more medical and living expenses and so on. For instance, during the devastating earthquake of April 25, most of individuals and households were dependent on their past saving for survival since the situation was not favorable to continue with the existing job. So, it wouldn’t be possible to survive without having excess to that emergency fund. Now it’s time to rethink about the liquidity risk that we might face in future and put the substantial amount for that emergency fund as a risk management tool.

A backbone for economy

It channelizes funds from surplus units to deficit units in the economy. There is a win-win situation for both the party. In one hand, needy one will get access to the fund and mobilize it in a productive and lucrative business sector and thereby helps to create employment opportunity and increases the overall Gross Domestic Product (GDP) of the nation. On the other hand, people with excess fund will get an opportunity to invest on portfolio which is safe and generate regular cash flows as well.   

Provision of Deposit Insurance

Still, people go for community based deposit institution like co- operative because of higher interest rate provided by them and the income source disclosure requirement in commercial banking system while making a deposit. But according to Mr. Bhattarai, it is recommended to go for commercial bank because sometimes the greed of that small interest would lead to loss of principal as well. And there is a witness of failure for such kind of depository institution in the history.

But it is not the case in commercial bank, here they provide deposit insurance for up to 2 lakhs in collaboration of Nepal Rastra Bank. 

Short- term and long term investment

Here bank deposit having tenure of less than one year is regarded as a short term investment and tenure of more than one year is long term investment. Importantly, the longer the tenure, the higher the rate of interest for depositor. Mr. Bhattarai also recommends to have at least 25 % saving in fixed deposit because it is the kind of force saving.