This is an article from The Mint dated 23rd March, 2022.
At PennyWise, we had discussed how inflation can eat up the purchasing power of money and that investing your money can be a remedy against that.
However, for the investment strategy to be helpful, the returns from those investments should be equal or more than the rate of inflation.
The article discusses two crucial issues:
1. Due to lower bank savings interest rates, the investors are attracted to Provident funds and small savings instruments.
2. And due to the diversion of money from banks to other schemes, the money available to the banks for lending reduces. Due to this, the banks cannot give cheaper loans to the borrowers.
So, the RBI, our central bank, needs to do some balancing act.