CHAPTER I INTRODUCTION The extent and speed of economic development largly depends upon the level of capital formation

n in a country. Savings go a long way in making the future of economic growth of a country. If we go through the economic history of developing nations of the world today, we shall find that saving as a single element has proved more powerful a catalyst than other factors like manpower, natural endowments, etc. Thus the economic development is no luxury, for it involves serious hardships on the people of a nation in order to boost the pace of capital formation. Thus savings are indispensable ingredient of economic development. This can be done easily pronounced with Federal Reserve chairman Alan green span repeatedly citing that to pull out us economy from the chains of recession a greater emphasis on the saving is to be made. This will improve the long-term vitality of the expansion program. The vital role of that savings play in the economic development of a country was well recognized by economics from time to time.

Role of savings Growth is a function of savings and investments in the economy, which along with the capital-output ratio determines the level of income. By increasing investment in fixedassets,plant,machinery,etc., capital form action rises which results in a rise in output depending on the capital-output ratio. The later is a ratio of output to capital
1

employed in any industry or productive activity. The total capital-output ratio for the economy, speaking is macro terms and the total volume of investment in the economy would determine the growth of output and incomes. Thus, output (o) is a function of investment (I); and capital-output ratio (k); o=f (I, K) where I is increment and k is marginal capital-output ratio, defined as namely a rise in output resulting from a given incremental capital sued in productive process. The average capital-output ratio and incremental capital output ratio are two ratios to be looked into for multiplier process to work from investment to income or output. Crudely expressed, if investment rises by 12% and capital output ratio is 4:1, then the income would rise by 3% (12/4).These ratios vary from industry to industry, sector to sector and activity to activity. Similarly, the savings ratio and investment ratio also vary in each of the industries and units and among the various sectors. In India , the net savers are the household sector whose savings are higher than the investments, leading to their positive contribution of savings in the economy on the other hand; business and government sectors are negative savers in that their investment is higher than saving leading to a net negative contribution to the economy. The foreign sector also contributes to net savings due to a larger inflow of funds through commercial borrowings and other forms of capital inflows. In underdeveloped countries there are bulks of unexploited unutilized and underutilized resources and savings are badly needed to utilize these resources. A dynamic society needs savings for its socio-economic development. India is a dynamic society but is also under developed , here savings are important due to
2

various reasons . A higher saving ratio implies a higher ratio of investment in new capital & material assets. Again, the higher the savings income ratio, the greater the growth of employment. The standard of living & its further development depends upon higher savings made. In India, where small savers predominate and where savers are dispersed over a vast area in innumerable villages, the work of savings organizations assumes great significance not only in quantitative but also in qualitative work.

Savings and Investments Investors are savers but all savers cannot be good investors, as investment is a science and art. Savings are sometimes autonomous and sometimes induced by the incentive like fiscal concessions or income capital appreciation. The number of investors are about 50 million out of population of more than one billion in India. Savers come from all classes except in case of the population who are below poverty line. The growth of urbanization abd literacy has activated the cult of investment. More recently, since the eighties the investment activity has become more popular with the change in the Govt. policies towards liberalization was accelerated by Govt. Policy changes towards a market oriented economy , through economic and financial reforms started in July.1991.

Objectives of Investors a) Income b) Appreciation of capital c) Safety d) Liquidity e) Hedge against inflation f) A method of tax planning. The mix of these objectives may also depends on the time frame of his investment, a) Short-term/day-to-day trading gains. b) Short-term capital appreciation up to one year( Short term capital gains). c) Long-term capital appreciation of more than 1 to 3 years (long term capital gains). Investment preferences of public may be set out in terms of their savings for: a) Transaction Purpose (for daily needs or regular payments). b) Precautionary Purpose (For contingencies or special needs).
c) Speculative or Asset Purpose (For capital gains and building of assets).

In an economy without social security the typical small saver is interested in an instrument that smoothens consumption over the lifetime. Small savings like Public Provident Funds and Retirement Funds play the role of filling the income gap once a person retires. If rates are cut without any perceptible improvement in the social security system, the principal amount saved will have to increase , in order to compensate for the decline in the interest rates, to attain the same target level of
4

income tomorrow. This saving including effect of a rate cut would, however, be checked if the inflationary expectations are also falling correspondingly. In the current scenario, in the absence of a social cover, the impact of the rate cuts would thus depend upon whether the inflationary expectations (as perceived by the savers ) have also declined. If these expectations have not fallen more rapidly than the fall in interest rates, there is hardly any possibility of a decline in saving rate. Past data also indicate that there is no significant relationship between the interest rate and savings of the household sector. There is also no evidence of a substitution between financial savings and physical savings. During the second half of the nineties, the growth rate of gross financial savings has fluctuated quite sharply with almost every high growth year being followed by a low growth year. Alongside these fluctuations, small saving rates were almost stable through a large part of this period, except towards the end, the interest rates on the other savings instruments had, however, seen a gradual downward movement. Although there does not seem to be any correlation between the interest rates and gross financial savings, same studies have noticed sensitivity of the internal composition of different fixed income instruments to be relative attractiveness of these instruments Should one, then, expect a movement away from the small savings instrument towards the other forms of deposits, especially because the tax saving potential of these instruments has also been slashed? Even here the extent of such reallocation could be limited. Since the cuts in small savings rates are usually followed by a
5

reduction in interest rates across the board, there is not much change in the relative attractiveness of the small savings instruments. So far, the date shows that gross savings in the small savings schemes have, in the words of the Reddy Committee Report witnessed a bellowing trend during the decade of the nineties. In the normal teems, gross collection rose from 18,920 crore in 90-91 to more than Rs. 75,000 crore in 99-00. While this ballooning trend may be checked because of the recent change, a significant recollection in the savings portfolio is probably not yet in sight.

CHAPTER II RESEARCH METHODOLOGY Research is the function, which links the public to the marketer through information. Information used to identify & define marketing opportunities and problems, generate, refine and evaluate actions & monitor performance. The research process ubdertaken to study the project is listed below.

RESEARCH OBJECTIVES The primary objective of the project is to Study investors perception of saving schemes in Amritsar City. The secondary objective which will support the main objective of the study are laid down as :
a. To gauge the extent and sources of awareness of the people regarding the

schemes. b. To analyze the schemes motivational factors for investment. c. To evaluate the different type of schemes and the factors governing their growth.

Research Design Primary data was generated by the study specifically designed to accommodate in the data needs of the project. A set of 2 questionnaires was made to meet the requirements of the project.

The first questionnaire was a structured and Non-disguised questionnaire containing questions distributed to 100 respondents . here a set of closed-ended , open-ended questions and Likert Scale were used. This questionnaire was made from the Customers point of view. The second questionnaire was made from the point of view of the Institution serving as channels to save and was structured & Non-disguised in nature. It was distributed to 20 institutions. Secondary data refers to the already existing data not gathered specifically for the project in hand to have the merit of economy and quickness of information Magazines such as Intelligent. Investors & India today were referred to Journal of Chartered Financial Analyst & Management review was used . Newspapers such Economic Times was a constant source of information throughout the project research.

Research Type The research conducted for the project was Descriptive in nature. As the name implies it was designed to describe the characteristics of the users of the various schemes, the degree to which the investors varied with income, age, sex, and occupation. To commensurate with the descriptive nature of the research a formal design of both the questionnaires were made. Both the questionnaires were structured & Non-disguised.

Sample Type: - The type of selected sample for the project of research was a group of Businessmen, Professionals, Servicemen, and Housewives between 25-70 yrs. Of age with a monthly income level of Rs. 10000 p.m. and above in the Amritsar city. This sample also included various Banks, Post Offices, and Insurance Cos. & Mutual Funds. Sample size:- As it was impractical to cover the whole city of Amritsar, A sample size of 120 respondents was used . A questionnaire survey of 100 investors was done and 20 institutions covered as per the requirement of the research.

Sampling Technique A technique of Systematic sampling was used. A random number of 2 were drawn between 1 and 5 and Houses numbered 2,7,12,17 and 22 were used in various localities of Amritsar. Unit of Analysis respondents of Amritsar City Research Technique Use of percentages and weighted average method.

Limitation of the Project Due to paucity of time , money & resources the sample size of 100 people & 20 Financial institutions was small which may bring some bias in the result. The option of investing in equity shares by the small investors has not been taken to limit the scope of study.

 There is a possibility of questions being misunderstood by few respondents due

to a variation in their academic standards. The sample size may not be true representation of the entire national market. To limit the scope of the project only life insurance has been taken as a mode of savings for small savers. Account fire, marine have been omitted.

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CHAPTER-III BEST INVESTING OPTIONS For the purpose of this study , the savings media has been divided into four catagories.: Banks Post office Insurance Sector Mutual Funds

People also put their savings in the capital markets but those have been excluded from here assuming that small investors are risk averse.

BANKS Commercial banks are the oldest and fastest growing financial intermediaries in India . They are also the most important depositories of public saving and the most important disburse of finance. For a financial system to mobilize and allocate saving of the country successfully , productively and to facilitate day to day transactions. Banks are a class of financial institutions that the public views as safe and convenient outlets for its savings with the opening up of the Economy private and foreign banks have spread their branches in India.

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YEAR

PUBLIC SECTOR BANKS DEPOSIT CREDIT

PRIVATE SECTOR BANKS DEPOSIT CREDIT 6.40 5.60 9.5 8.30 5.20 4.60 4.60 4.20 4.20 3.40 7.90 8.90 6.20 8.70 6.10 8.90 9.80 5.70 5.70 2.90 3.30 2.90 3.50 4.40 4.50 6.70 8.90 8.60 9.20 8.70 9.50

FOREIGN BANKS DEPOSIT CREDIT

1970 1975 1980 1985 1990 2000 2001 2002

84.7 84.6 84.8 86.0 91.9 92.1 92.5 92.3 91.7 92.1 85.4 82.2 85.2 82.1 85.2

81.9 8.60 (Source : From various editions of Economic Times)

POST OFFICE Post offices function as Banks in respect of mobilization of savings and time deposits. Even after two decades of nationalized banking. It is the agency of post office through

12

which small saving schemes are administered, thus has reached the largest number of villages in India. On 31 March,1986 , saving scheme bank facilities were available at 847 head post offices, 29518 sub post offices, and 1,11,766 branch post offices. Although post offices have great potential for channeling resources into rural to the urban areas. A number of important characteristics of the post offices are as follow:

1)

These assets represent medium-term and long-term investment opportunities.

They are a good substitute , from the point of view of spread of maturity, liquidity and safety. 2) Many of them are in the form of reinvestment plans. Therefore, they offer good

opportunities to those investors who can forgo current income: they are also desirable from point of view of mitigations inflationary pressures. 3) With Recurring Deposits (RD) one withdrawal up to 50% of deposit is

permitted.
4)

The interest rate charged on the withdrawn amount with 15 %. There are no

facilities for borrowing against deposits from post offices as there are from Banks, similarly , NSCs are also pledge able. 5) 6) POSB deposits are as liquid as bank demand deposits, perhaps a little more so. Finally for those who belong to the income tax bracket small savings carry

excellent tax benefits.

Some of the schemes of Post Offices are as under:13

1. NATIONAL SAVING CERTIFICATE(NSC) The tenure is six years. The amount paid on maturity includes the principal amount invested and the interest earned over the years. Every 100 rupees invested for 6 years , yielding Rs. 174.52 which means a return of around 8% compounded half yearly. Tax Benefit One can avail of the benefit of Section 88 up to overall limit of Rs. 70000. Thus a rebate of Rs. 14000 will be allowed on the maximum of Rs. 70000.The person who has invested the monet out of his income chargeable to tax can claim the benefit. The interest qualifies for tax benefit under Sec.80 L up to an overall limit Of Rs. 12,000.Thus the amount reinvested also qualify for rebate under Sec.88.

2. PUBLIC PROVIDENT FUND(PPF) The public provident fund is an effective tax saving vehicle as well as instrument for retiring savings. The government sponsored institution is safe and provides good returns-there are few that give you similar return without exposing you to greater risk. The term of a PPF account is 15 Years. The money that you deposit in the Fund earns interest at a rate that government fixes. Interest is

calculated for a calendar month on the lowest balance in your account the close of the fifth day and the end of the month , and is credited to your account at the end of the each year.
14

Tax Benefit The interest credited to your account as well as withdrawals from it , are exempt from income tax. The balance held is fully exempt from wealth tax , without any limit. One can avail the benefit of Section 80C/88.

3. KISAN VIKAS PATRA (KVP) It is a fixed income instrument and the maturity is always fixed in such a way that the amount gets doubled during the term of the instrument . For investments made after 1 March,2003 the amount invested doubles in 8 years and 7 months . The rate of return is 8.4%. Tax Benefits There is no tax benefit of any kind . The interest is fully taxable in the hands of the investors in the year of receipt.

4. POST OFFICE MONTHLY INCOME SCHEME (POMIS) The tenure of the scheme is six years. The rate of return is 8 % payable monthly. One has to visits the post office to claim the interest on regular basis. One can open a Saving account or a Recurring Deposits in the same post office to get the monthly interest transferred to them. However , not all branches have facility. After six years there is a bonus of 10 % of the amount invested paid to the investor. Tax Benefits The interest earned would qualify for tax exemption under Sec. 80 L.
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5. POST OFFICE SAVINGS BANK DEPOSITS(POSBD) This scheme has been in existence since 1896. At present it pays 3.5% rate of interest. Tax Benefits The interest accrues yearly and is tax free under section 10(15)(1). Further the investment is deposit qualify for exemption from wealth tax to the prescribed limit of Rs. 5 Lakh but not beyond Post Office Schemes Scheme Interest (%) Min. Investment (Rs.) Max. Investment (Rs.) Features Tax Breakes (Income Tax Act NSC 8.00 100 No limit 1962) 6-years, tax Sec.88/80L saving PPF 8.00 500 70,000 instrument 15 year term Sec.88 tax KVP 8.41 100 No limit returns Money free 10 No Tax and

Doubles in 8 Benefits years and 7

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POMIS

8.00

1000

Single A/c3 Lakh Joint A/c.6 Lakh

Months 6-years tenure monthly returns ,

Section 8o L

bouns after 6 PORD POSBD 7.50 3.50 10 20 No limit Single A/c1 Lakh Joint A/c.2 Lakh years. 5 year tenure Section 8o L Tax interest, Cheque facility free Tax Under 10 free Sec.

GENERAL NATURE OF INSURANCE COMPANIES Insurance companies are financial intermediaries as they collect and invest large amount of premiums. They offer protection to the investors, provide means for accumulating savings and canalize funds to the government and other sectors. They are also in a a position to predict , relatively, accurately , when and what amount of insurance or pension have to be paid. Further their liabilities are most cases are long term liabilities , for many life policies are held for 30 or 40 years or 50 years or even more. As a result, liquidity is not a problem is held for 30/40/50 years. Their major activity in field of long term investments. Since they offer life cover to the investors,

17

the guaranteed rate of return specified to insurance policies is relatively low. Therefore, they do not need to seek high rate of return on their investments.

LIFE INSURANCE CORPORATION There has been life insurance business in India since 1818, till 1956, the insurance business of all companies as mentioned was nationalized and a single monolithic organization, the life insurance corporation of India (LIC) was get up today. Life insurance is almost entirely in the hands of LIC . The post and telegraph department conducts some business in this area for its employees: but the volume of that business is relation to that of LIC, is negligible and declining.

Life Insurance (term) Age LIC HDFC STD 25 30 35 40 45 50 1,601 2037 2910 4462 7227 11204 2620 2820 3050 3840 5520 8320 BIRLA SUN LIFE 2890 2950 3310 4310 5990 8790 MAX NEW YORK 2110 2280 2920 4160 6370 10000 OM KOTAK 3100 3400 4200 5778 8056 12020 ICICI PRU 2327 2504 2925 3601 5338 8197

Type and structure of Insurance Plans

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Life insurance policies make a very flexible financial instrument. There are only few basic types of such policies, viz. term insurance, whole life insurance, endowment insurance, annuity insurance, individual insurance, group insurance, pension plans, childrens plans, an equity linked plans. These policies are mostly specific to different income and age groups. Whole life policies charge a premium throughout one s life while endowment policies are taken for a fixed period, The latter provide life cover and also adequacy return . The former also cover life and are intended to be long-term investments, which cover, is rather than provide return. Life policies of any type can be either with profits or without Porfits. In the later case sum paid out on maturity or at death is sum assured in the policy when it was taken out. In the former case business out of extra earning from various investments are added to the assured sum periodically during its currency . The premiums on with profits are higher than without profits policies as an allowance for bonus paid.

Mutual Funds The Mutual Funds is a trust at law; it is a special type of managed, pooled portfolio financial company or financial service organization that sells shares/units/stocks in itself, to the public to obtain its resources, and it invest the savings so mobilized or pooled in a large , diversified and sound portfolio of equity shares in its total funds which is proportionate to their investments, and which is evidenced by the unit certificates.
19

Types Of Schemes 1) Open ended funds (Oafs). When the units are sold and redeemed everyday or

continuously on an on-going basis at the price determined by the funds NAV , they are called Oafs. 2) Closed ended funds . on other hand , do not sell any additional units after the

same of affixed number of units at the initial or inception stage, during a fixed period of time when the issue is open for subscription.
3)

On the basis of their primary objective , MF scheme can be classified as a)

aggressive of pure or normal growth scheme ; b) pure 0r regular or monthly or cumulative Income scheme; c) Growth and income. Or Balanced Schemes d) Special purpose Schemes: e) Sectoral Scheme , and f) Tax saving Scheme.
4)

MFs are also named on the basis of their specialization in respect of

investment asset . For example, there are common stock or equity funds, Bond funds, Money Funds, Real estate funds precious metal funds, and so on.
5)

Index Funds invest their resources only in a portfolio included in a select

index . They enable MFs to earn the market return. 6) Venture capital Unit funds are CEFs meant for institutional investors; their

resources are invested in venture capital cmpanies. 7) MFs may float certain schemes to raise resources abroad and bring them home

for investment such schemes are known as offshore or Overseas Funds.

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CHAPTER-IV MOTIVATIONAL FACTORS

Motivational Factors Behind Savings Small investors can be divided into many categories according to the risks they take. A srisk rises, so do potential gains/returns. A risk adverse small savings investor earn around 9 % . A long term dividend player can earn around 11-13% from judicial investments in Mutual Funds.

A risk- averse investor prefers to stick to small savings, insurance and bank

fixed deposits. He pays the law tax and aims to earn low but assured return while protecting capital.

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A less- adverse player will some saving into mutual funds. He hopes to earn

dividend income and also make capital gain . He risks some capital loss.

Some investors will take long term investments in sound business aiming to

earn both capital gain and dividends over long term. The risk of capital loss is more but long term capital gain tax is low.

A few brave hearts try to take stocks for high gains . Short term capital gains

are taxed at same rate as long term. The Speculative risks heavy loses to earn extra returns, For the purpose of this project it is assumed that the investors will not put his small savings in the stock market therefore equity investors are ignored. Below are described some of the motivational factors behind the investing of the players 1. Tax Rebate A large no. of investors have a preference for investment in postal schemes. UTI units or schemes of LIC particularly because they enjoy tax rebate & deductions on them Tax Trimmers. Section Deductions from gross total Qualifying

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80 CCC

income Amount Payments to LIC or to any approved Upto Rs. 10,000 insurer for An approved pension

80D

plan. Premium paid for an approved Upto Rs. 10,000 scheme by GIC Upto Rs.15,000 Arogya)or For Senior Citizens Govt.

(Mediclaim,Bhavishya 80L

any other approved insurer. Interest on Central/state securities debentures ;bank and bonds

deposits; of co-

operative societies ,notified public companies and PSUS : post office monthly income deposits, securing Deposits; co-operative society deposits, time

deposits; NSC VII issue ; NSS 1992; deposits with specified

authorities and financial institutions ; deposits with state housing

board ,housing finance companies dividends from shares of co-

operative societies.
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2. Risk Cover The saving schemes vary in the risks covered which serves as a prime determinant for the investor to put his money. The schemes may be segregated into Risk free &less risky schemes. The risk free securities are: 1) Post office schemes 2) Bank schemes Less risky ones, which bear some amount of, risk are:1. UTI Schemes 2. Private mutual funds. All the Mutual funds whether public or private carry some amount of inherent risk in them. Because they pool the money of these people from their savings and invests them in a diversified portfolio of financial assets with a view to reduce risks and to maximize their income and capital appreciation for distribution to its investors on a pre rate basis. Some of the private Mutual Funds Operations in India are:I. II. III. IV. V. VI. Franklin Templeton Zurich Mutual Fund IL & FS Mutual Fund Zuari investments Mutual Fund Kotak Mahindra Mutual Fund Sun F &L MF

VII. IDBL Principal

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VIII. Prudential ICICI Mutual Fund IX. X. JM Mutual fund HDFC Mutual Fund

3. Insurance Aspect Insurance is one sector where people without any hesitation put their savings, which proves to the best for covering the various risks of the investors. The intense competition among new private insurers in the past year has meant that for someone who wants to buy life insurance ,a wide and customized choice is available today at for lower cost. The Introduction of riders has also opened up a whole new way to look at life insurance. For instance up until a year ago, you had bought one of four classes of policies from LIC. An endowment policy A money back policy A whole life plan A term plan

4. Quick Liquidity For the purpose of meeting day to day expenses Postal Schemes & Commercial Bank. Schemes prove to the best . POMIS which refers to the post office monthly income

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schemes offers an interest rate of 8% period monthly income of to the investors. These schemes are preferred by Housewives or Retired people. The bank offer MIDR which refers to monthly Income deposits rate giving an interest rate of 8.25% is also very popular among investors. LIC schemes or UTI schemes do not offer investment liquidity which is les than 5 years therefore it is not popular among savers to which quick liquidity serves as the best characteristic. 5. Capital Appreciation Interest rates have a big impact on, the household portfolio decisions in a big impact on , household portfolio decisions in a falling administered rate regime. With the latest cut of 0.5% age points, the return on small saving has dropped to 9% in the space of few years because of which the fixed deposits now fails to cheer the small investors. Capital appreciation acting as, a motivational factor behind savings is losing its importance with coming days. And if the Govt. Implements the Y.V .Reddy committee report, fixed returns on small savings will be history . The Reddy panel has recommended a floating rate regime, under which returns from small savings will be tied to secondary market yields on Government securities of comparable maturity profiles. In other words uncertainty of returns.

6. Friends or Family Member Advice

26

Friends and family members serve as the most effective part of reference groups of the people. An individuals family often is in the best position to influence his or her investment decisions. Friendship groups are typically classified as informal groups, because they are usually unstructured ad lack specific authority levels. In terms of relative influence, after an individuals family, his or her friends are most likely to influence his purchase decision. In case of female taking investment decision come from husband, parents and then friends rank in the order of influence. If the male counterpart is taking the investment decision then his peers, parents and lastly housewife serves as a major influencing factor.

7. Regular Return Retired persons & single parents having children prefer regular returns from savings to meet their day-to-day expenses. They prefer to channelise their money is postal schemes which provide regular monthly returns or some bank schemes LIC & UTI are preferred if they are in good cash positions.

8. Institutions Image The image reputation & goodwill of the institutional is a colossal effect on the minds of the investors. UTI used to be an institution where small investors fearlessly parked their savings having a deep-rooted trust that savings were safe. UTI s reputation as a money manager has taken a beating. After the US-64 faisco in a quarter UTI saw a net outflow
27

of Rs.1262 crore , against a net inflow of RS. 157 crore during the same period, last year. This reveals that UTI has lost, the image it could boast off ,earlier. The figures above show that the image of the institution has a great impact on the investors mind while investing his hard earned money.

9. Safety of Investment Safety is another feature which the investor desires for investment. A recent survey conducted by faculty of IIM Lucknow about Study of perceptions of investors showed the following results when asked their view about safety of investment options. The perception towards four major investment option,viz. Postal schemes, Bank deposits, Mutual funds and insurance schemes were examined on a seven-point scale. The score 1 indicated absolute safe and 4 unsafe. Investment options Postal schemes Bank Deposits Mutual Funds Insurance Rank 1 2 4 3

The postal schemes showed to be absolutely , safe investment option , followed by bank deposits, insurance and mutual funds. So , most investors are found to be conventional and laggards and prefer safety of their investments to returns.

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CHAPTER-IV DATA ANALYSIS AND INTERPRETATION

Empirical Analysis 1) Demographic Profile of Respondents The sample size consists of 100 respondents from Amritsar city. A) Sex-Wise Distribution

Sex Males Females

No of respondent 60 40

B) Age-Wise Distribution

Age groups Under 25 26-44 45-58 58 and above

No of respondents 15 Males+5 Females 15 Males +20 Females 20 Males +10 Females 10 Males +5 Females

29

C) Occupation Wise Distribution

Occupation Businessman Servicemen Housewives

No of Respondent 45 30 15

D) Income Wise Distribution

Income (Rs.) Below 80000 P.a. 80000-150000 150000-300000 Above 300000

No of Respondent 20 40 20 20

E) Martial Status Wise Distribution

Martial Status Unmarried Married

No of Respondent 18 82

2) Percentage of Income Saved

30

To know the % of income people saved respondents were asked to tick the brackets under which they fall. The tabulated data in the table No. 1 shows the responses. Table 1 Showing %Age of Income Saved Percentage Of Income Saved No of Respondent None 5% -10% 10%-15% 15%-20% Above 20% 0 8 15 15 62

Chart -1
70 60 50 40 30 20 10 0 None` 5% 10% 10% 15% 15% 20% Above 20% No. Of Respondents

% of Income Saved The tabulated data shows a mixed response though more inclined towards above 20 % bracket.

31

The data revealed that normally unmarried people preferred to save between 5-10% whereas more than half of the sample (62%) saved above 20% of income

3) Utilization Pattern of Savings To know how the people utilized their saving, they were asked to tick relevant responses. The responses were inclined more toward investment schemes. Table 2 and chart 2 Shows: Table 2 Saving utilization option Invest in scheme Buy gold or property Spend it Kept liquid cash No of Respondent 65 10 2 23

The distribution revealed that people in the income group under Rs. 80000 P.a. and unmarried kept their savings as liquid cash to spend it whenever required. However woman in service as well as housewives preferred to buy Gold for themselves and children.

Chart 2

32

Invest in scheme Buy Gold Spend it Cash

3) Awareness Of Saving Instruments:To determine the awareness level of the various savings instruments available in Amritsar ,the respondents were asked to tick the relevant responses. The tabulated responses reflected in table 3 Table 3. Awareness of saving No. of respondents 100% 100% 100% 100% 22%

instruments UTI units LIC schemes Post office schemes Commercial banks Private mutual funds

The figures in the parenthesis indicates the response. The trend pattern shows that there is cent percent awareness regarding UTI, post office ,banks & life insurance schemes , whereas people are hardly aware of the private mutual funds. This is mainly due to less no. of private mutual funds in Amritsar . ICICI is the only one private mutual fund which has its own office . Rest of the MF schemes

33

are available from stock holding corporation as well as same from ICICI office.

Chart 3
120% 100% 80% 60% 40% 20% 0% No. of Respondents

UTI Units

LIC Schemes

POST OFFICE Schemes

Commercial Banks

Private Mutual Funds

The results indicate the need to give a filling to the awareness of the people regarding Private mutual funds. This result should be achieved by promotional campaigns and advertising.

5) Institution Used To Part Saving Lastly To know the latest about how in which institution the people parked their saving, mixed response was revealed. Some people used more than one institution to put their savings in the tabulated results and shown in table4 and chart 4 below.

34

Table: 4 Institutions UTI units post office LIC Banks Respondents 10 70 56 15

70 60 50 40 30 20 10 0 UTI units Post Office LIC Banks Respondents

The trend shows that PO attracted a major part of peoples savings,followed by followed by LIC . People did not show much interest .In UTI units and banks. The major reason behind not investing in banks was the low rate of interest offered and UTI was the recent scam. This chart reveals that PO followed by LIC is the most popular modes as far as Amritsar City is concerned.

35

6) Source Of Information While Making Decision About Investing In Varied Schemes:To know that influential source of the adopter categories , the respondents were asked about the information source. Some of the respondents ticked more that one source but some were very particular about their source because this decision concerned with hard earned money, so could just their family and friends. The tabulated data is table no. 5 graph 5 shows the trend. Table 5: Showing information source used while investing Information source Print media Visual media Family and friends Faculty members
90 80 70 60 50 40 30 20 10 0 Print media Visual Media Family & Friends Faculty Members RESPONDENTS

Respondents 24 02 82 24

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The trend pattern shown about clearly reveals for as this decision concerned parking their hard earned money in a safer place people highly took advice from their family members and friends. It is seen that women both housewives and service women showed 100% reliance on the advice of family. The case was same with unmarried respondents. Respondents are the age group of 45-48 also referred to print media and the advice of family . The case was same with unmarried respondents. Respondents are the age group of 45-58 also referred to print media and the advice of the faculty members of the institution. The data reveals that visual media should be given a boost to influence people help take important decision.

7) Factors Motivating People To Invest:To know what were the best factors, which motivated people to save the respondents , were offered to tick their choices on a like scale. The tabulated date with regard to each factor and shown in table no.6 below. The weights assigned to each factor and shown in table no. 6 below:The eights assigned to each factor:Extremely Imp Very imp Neutral Not very imp Not at all imp - (2) - (1) - (0) -(-1) - (-2)
37

(a)

To Avail Tax Rebate While Investing Neutral 15 Not very imp Not at all -

Extremely imp Very imp 60 25 Using Likert scale 60*2+25*1+15+0+0-1+0*-2 (b)

To Get Insurance Cover Neutral 16 Not very imp 12 Not at all -

Extremely imp Very imp 28 44 Using likert scale 28*2+44*1+0*16+-1*12+-2*0=88

(c)

To Appreciate Captial Neutral 5 Not very imp 21 Not at all 3

Extremely imp Very imp 41 30 Using likert scale 42*2+30*1+5*0+21*-1+3*-2=85

(d) To Get Quick Liquidity Extremely imp Very imp 18 61 Using Likert scale 18*261*1+12*0+9*-1+0*2=88 (d) To Go Friends &Familys Advice Neutral 40 Not very imp 45 Not at all 5 Neutral 12 Not very imp 9 Not at all -

Extremely imp Very imp 0 10 Using Likert scale

0*2+10*1+40*0+45*-1*-5*-2=45

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(f) To Get Regular Returns Extremely imp Very imp 51 24 Using Likert scale Neutral 0 Not very imp 25 Not at all 0

51*2+24*1+0*0+25-1+0*-2=101

(g) To Rely On Institution Image Extremely imp Very imp 25 39 Using Likert Scale Neutral 9 Not very imp 0 Not at all 0

52*2+39*1+9*0+0*-1+0*-2=143 (h) To Avail Safety Cover Extremely imp Very imp 83 17 Using Likert scale Neutral 0 Not very imp 0 Not at all 0

83*2+17*1+0*0+0*-1+0*-2=183 The analysis of the Likert scale reveals that factors of the Safety of investment are extremely motivating followed by tax rebate and institution image. Whereas factors such as friend & familys advice was not a very motivating one behind investment followed by capital appreciation & quick liquidity . The factor of regular returns showed its perfect neutrality . 8) Preferred Tenure Of Saving

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To know what was the best preferred tenure of saving or the suitable lock in period ,the respondents were given the choice to pick from. The tabulated data in table 7 and chart 7 reveal the trends. Preferred tenure Upto 1 yr 1-2 yrs 2-5 yrs Above 5 yrs No. of respondents 8 9 50 33

The trend pattern clearly indicates that the most popular tenure or lock-in period for their investment in 2-5yrs mostly preferred by people below 25 yrs & above 50 yrs. The savings mostly go in to post office or LIC . The above can be clearly depicted with the help of a graph given below.

Upto 1 Year 1-2 Years 2-5 Years Above 5 Years

9) Family & Friends Influence On Choice Of Savings :The first question regarding the choice asked by the respondents was, which information source was beneficial while making investment decisions. Friends & family dominated the scene followed by family members advice. Now the question put the

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respondents was to what extent does friend and familys advice influence their choice of savings. Table 8 Influential familys advice Very likely Some what likely Undecided Very unlikely Therefore , though the advice No. of respondents 33 42 0 25 of family was beneficial it did no have a dominants

influence on the choice of saving media. At 25% said their advice was same what influence and 25% said their advice was not influential. This can be show with the help of a graph 8 as below:-

45 40 35 30 25 20 15 10 5 0

No. Of Respondents

Very Likely

Some what Likely

Undeciced

Very Likely

10)

Changing Portfolo Of Investments:-

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To know how to people change their portfolio of investment as times change, four choices were offered to them and were required to tick the relevant choices. The trend is show below in the table 9 and graph 9 below:Change of portfolio No. of respondents Change in rate 58 Friends recordation 5 Advice of faculty 10 Changed image of institution 27 Therefore , the tabulated data clearly reveals that change in interest rates does push them to change their portfolios as 58% people said that moreover institution image also mattered a lot most of the respondents referred to UTIS bad image due o the last US -64 scam. This can be shown by the chart below:-

27

Change in interest rate Friends Recordation 58 Advice of faculity Image 5

10

11)

Perception Of Respondents Regarding Saving Options On Factor

Such As Safetyliquidity,Return And Convenience

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The perception toward the four major investment option viz post office ,banks, UTI & LIC were also examined through 4 point scale on four different attributes viz safety, liquidity, convenience and return. The score 1 indicate absolute safe liquid , convenient and return whereas 4 indicates unsafe low liquidity low return and inconvenient . The date gathered is tabulated in the 4 table below : (A) Perception Toward Different Investment Option In Terms Of Safety OPTIONS RANK Post office 1 banks 3 Mutual funds 4 LIC 2 (B)Perception Of Investors Towards Different Investment Options In Terms Of Liquidity OPTIONS RANK Post office 3 Banks 1 Mutual Funds 4 LIC 2 (C) Perception Of Investors Towards Different Options In Terms Of Convenience OPTIONS Post office Banks Mutual Funds LIC RANK 2 1 4 3

(D) Perception Of Investors Towards Different Options In Terms Of Return OPTIONS Post office Banks RANK 1 3
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Mutual Funds LIC

4 2

CHAPTER-VI EMPIRICAL ANALYSIS & FINDINGS ( From Questionnaire For Financial Institutions) SAMPLE SIZE -20 Distribute to Insurance companies 4 banks 11 Post office 2 Mutual fund 3 I Three most popular schemes provided by institutions and what rate of interest Schemes Banks Fixed Deposit Scheme Saving Bank Scheme Recurring deposit scheme 5.5-6%yearly 3.5& yearly 5.5-6% yearly Rate of interest

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Post office: Monthly Income Scheme Kisan Vikas patra National Saving Certificate 8% 8% 8%

Insurance Cos: Money bank policy Endowment assurance Jeevan MItra 8.9% 8.9% 8.9%

Mutual funds: UTI Bond fund Us-64 Gilt Bond (no specific) (no specific) ( no specific)

Private Funds: Pro Income Plan GSSIF IP Pioneer ITI-IBA Amritsar city is not open much of private mutual funds. Prudential ICICI has the sole
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Private fund office located here, though they provide standard chartered mutual fund, Kothari pioneer ,alliance capital and franklin templetion. The availability of private mutual fund scheme can also be had from stock holding corporation but it seems that 95% of investors in Amritsar are hardly aware of its operation.

II. Advertising Schemes Options Print media pamphlets World of mouth No. Of respondents 14 4 through 2

faculty The following response can be depicted will be help of a chart given below:

Print Media

Pamphlets

Word of Mouth Through faculty

III. MOST FREQUENT TARGET CUSTOMERS Options Service men & professionals Businessmen No. Of respondents 12 8
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12 10 8 6 4 2 0 Service men & professionals Businessmen No. of Respondents

IV. Level of Income Group That Most Prefers Different Institutions Options Upper level Middle level Lower level No. Of respondents 2 15 3

Upper Middle Lower

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Out of the 15 respondents to say that people belongings to middle class most prefers their institutions are two post offices ,eight banks, UTI bank and four insurance companies. It is solely the private mutual funds who deal with upper class customers or investors whereas three banks say that lower level income group prefers them.

IV. Motivational Factors Behind Savings options Tax rebate Capital appreciation Risk covered &regular return Quick liquidity safety Maturity
12 10 8 6 4 2 Capital Appreciation Tax rebate Quick Liability Safety Risk Covered Maturity 0

No. of respondents 3 3 11 3 3 0

The respondents were asked what could be the motivational factors behind savings of investors , UTI , LIC & GIC said tax rebate ,two private funds and LIC said capital appreciation whereas post office & UTI said safety. There were repetitions in the answers and a mixed response was seen.
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VI. Popular Tenure of Saving Options No. Of respondents Upto 1 year 2 1-2 years 3 2-5 years 11 Above 5 years 4 The tabulated data shows that people normally prefer 2to 5 years of lock in period for their savings. Whereas all the insurance companies said their tenure was above 5 years. The following response can be shown with the help of pie chart.

VII. Reaction Towards Negative Changes In Budget The response pattern of the response can be shown in the table below:Options Change portfolio Adapt themselves Invest in equity Keep liquid cash No. of respondents 7 9 1 3

The tabulated data can be shown with the help of a chart below:-

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Change Portfolio Adapt Themselves Invest in Equity keep Liquid Cash

The data above shows that the effect of negative changes proposed in the budget will force the investors to adapt themselves with low returns. This was followed by saying the people could also change their portfolio. Whereas one of the twenty said that people could also invest in equity. I. Popular Mode Of Saving Among Investors The response is as below:Options Mutual fund Insurance Post office Banks No. Of respondents 1 3 7 9

The tabulated data above shows that the best-opted mode of savings by the investors inclined towards banks therefore they say banks therefore they say banks are most popular .
Upto 1 year 1-2 years 2-5 years Above 5 Years

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IX. Mobilization of savings by financial institutions The response pattern is shown in the table below:Options Private loans Central/ state govt. Treasury Invest in govt. Schemes Invest in corporate securities
9 8 7 6 5 4 3 2 1 0

No. Of respondents 11 2 5 2

No. Of Respondents

Mututal Funds

Insurance

Banks

Post office

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CHAPTER-VII CONCLUSION AND FINDINGS

Savings constitute around 20% of an individuals income which have to be parked in some financial institutions for capital appreciation as well as safety. According to the investment option have divided the saving media into four groups 1,post office 2.mutual fund 3.Banks 4.Insurance sector. Over the years ,quite a few changes have been introduced in the media and facilities made available to the public; some schemes have been discontinued ,other modified and still other newly introduced. The present study was undertaken to access the The perception of saving schemes A case study of Amritsar .Moreover the different

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investment options available in the financial institutions were scrutinized by questions distributed to them. The respondents were personally approached outside the officers of bank, LIC officers, UTI officers and post office. Moreover questionnaires were distributed to teachers in the schools as well as housewives to avoid biasness in the results. After scrutinizing the questionnaires and the personal interviews has with the 120 respondents it is seen that:-

1. POST OFFICE had emerged as the most attractive savings media &has dominated

all the other investment option in terms of safety of investment, good returns and convenience.
2. INSURANCE SECTOR with the life insurance corporation comes second in scene

with being next to post office in terms of popularity there are other insurance companies in Amritsar such as oriential insurance ,new India insurance but LIC overshadows these with its attractive schemes.
3. BANKS come next in scene,their importance has declined over the yrs because of

the falling interest rates. People with little amount do not hesitate to deposit it is the banks closet to their homes. The opening up of ATMs has withheld the prominence of banks otherwise they are losing their importance to post offices.

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