25-July-2023
Depreciation of a currency
Depreciation of a currency refers to the decline in the value of nation’s money in relation to one more foreign currencies. In simple words, if the price of a product was Rs. 100.00 last year , would stand at at Rs. 110.00 now, if the percentage of depreciation of currency is 10%. In other words, the bargaining power of Rs. 100.00 deprecated @ of 10% and stand at Rs. 90.00 after one year. The depreciation and appreciation of any currency is usually calculated against universal currency of US dollar and depending on factors like political stability of a nation, deficit in Export Import figures, calamities, war etc.
The percentage of depreciation of Indian currency is arrived comparing with US dollar. The Indian rupee which was 77.31 against US dollar in May 2022 now stand at Rs. 82.24, registering a depreciation of 6.40% within one year. Ii was once depreciated at 10% against US dollar, though it appreciated afterwards.
Even though Indian currency depreciated at around 8-10% a year, the exact deprecations exceeds more than 10% in real term. The deprecation of currency results a chain of actions, - less bargain power of the currency- more money in hand of citizen but less value- hike in prices of commodities and services and so on.
The consumer price Index (CPI) which give the index for price variation of consumables and services like food, apparel, electronics and services like transportation, medical care etc. Higher the CPI - higher inflation in a country.
Recently we heard that the prices of essentials in our neighbouring country was shoot up uncontrollably and essential commodities like flour, oil etc become unattainable to poor country folks. CPI of that country stood at 224.41 % and inflation at 29.50%( in April 2023)where in India it was 6.44%(CPI) and 4.70% ( inflation).
Even though, our Nation’s Inflation rate is only 4.70% now, in bitter truth ,prices of commodities, services etc are escalating beyond the inflation rate. We are also observing that there were some up and downs in prices of Agriculture commodities depending up on its seasonal price variations.
We understood that rising inflation results reducing purchasing power in the hand of citizen. This will mostly effect ultra-lower, lower, lower- middle and middle class population of a nation.
Repo rate and interest rate on deposits.
When the inflation goes up, the RBI as a controlling mechanism, increase the repo rate for commercial banks. Repo rate is the rate at which Reserve Bank of India lend money to banks. This is an indicator for banks to increase their lending rates.
Economics behind increasing/decreasing repo rates by RBI.
By increasing repo rates, bank will proportionally increase interest rates on loans and thus loans become costly .At costlier funds, corporates and other producton houses slow down consumptions and productions, Home builders postpone their constructions plans, traders will not fully utilize their working capital loans and keep less stocks etc.
By increasing repo rate, the availability of funds from RBI become costlier and banks will forced to increase deposit interest rate to compensate the shortfall in funds.
At higher rate on deposits, public will be attracted to park their excess funds in banks, rather than spending in open market. Both this mechanism- costlier funds and higher rate of deposits- will cease the demand for raw materials and commodities in the market which will leads to reduction of price and inflations. This will, however, if prolonged infinitely will adversely affect the nation’s economy, Govt. will be getting less tax income, results less developmental activities.
By decreasing Repo rate the entire economic activities mentioned earlier will be reversed. More commodities are produced, more services available, houses are getting constructed again and nation’s economy will bloom again.
Deposit Interest rates and Purchasing power of public
The interest amount that is received on short terms deposits will have little effect on depositors purchasing power but that of long term, surely hit on account of currency and CPI depreciations.
The maximum interest rate now available in commercial bank for one year period varies in between 7.to 8%. If the Indian rupees depreciated at 8% or more the depositor will be at loss in real terms.
The general public are seriously searching for higher rate of interest for conquering currency value depreciations. State Co.Op. Societies are offering only 8-8.50% for one year. Unfortunately, rates offered by Commercial banks and state Co. OP. Societies are not shielding the risk of currency fluctuations.
There are unscrupulous Crooks in the market who are offering extra ordinary interest on deposits to the public. It is a simple logic that, a business will not run on money along, it should have infra structure, man power, other administrative set ups and no ligimate business venture can generate enough income to pay back these exorbitant interest to its depositor after making a reasonable net profit .
What will an ordinary citizen do who desires to park his funds and get a reaosnale interest income?. Any brigh ideas available in the market?
Malankara Multistate Co.Op. Credit Society
Yes. There are few legitimate organization in the country, who are offering best interest rate to overcome currency depreciations .Malankara Multistate Co.Op. credit Society ( MMSCCS)is one such organization, who are registered with Central Registrar, Department of Co.Operation, Govt. India.The Society is authorised to accept deposits from its members at a rate which will enable them to make sufficient net profit after meeting all interest other organisational obligations.
MMSCCS is one of the best financial institutions in the country, which is professionally managed by a group of efficient Board of Directors and supported by financial experts. The Society now offering a most attractive interest rate of 12.50% for one year deposits to its members. The depositor can also draw monthly interest on his/her deposit.
Membership Procedure
As per Law, the structure of a Multistate Co. Op. Credit society is that it is functioning only for the betterment of its members. Hence if you want to deposit money or avail loans, you will have to be a member of the society. The procedure to become a member of the society is a simple procedure-Approach any branches /CFCs(Customer Facilitation Centres) along with your KYC documents, one photos and membership amount. Your Adhar Card and details of Nominee are compulsory.
Why Hesitate ? Be Wise, come forward and conquer the threat of currency depreciation by parking you funds in MMSCCS.