Bank FDs in spotlight as returns of liquid funds hit two-decade low

1-year returns down to less than 3.5%, below short-term rates offered by banks on FDs

Returns on liquid funds have slumped over the past few months, with 1-year returns now at 3.4 per cent — among the lowest in the past two decades — and below the short-term interest rates offered by several banks on fixed deposits.
 
This will especially hurt institutional investors, who contribute an estimated 80 per cent to assets of such funds.
 
There is excess liquidity in the system following the supportive action by the Reserve Bank of India (RBI), with reverse repo rates at 3.35 per cent, and this is being reflected in the returns of liquid funds, said