Households’ shift to market-linked products raises financial risks

The Finance Ministry has warned that moving household savings to market-linked financial products presents significant risks. This information was shared with Parliament, emphasizing potential financial losses and issues with bank liquidity. The department pointed out that as people withdraw their savings for potentially higher returns, banks face challenges. Losing these deposits means banks have less low-cost funding, which could ultimately drive up their operational costs. Additionally, the committee in Parliament suggested several measures to address these issues. They recommended steps to manage liquidity problems, enhance customer outreach, especially in rural areas, and use technology for better efficiency. On another note, the committee discussed the proposal for complete foreign direct investment in the insurance sector. They raised concerns about profit repatriation, the autonomy of domestic companies, and the impact on jobs. They urged caution to ensure that insurance services reach rural and lower-income groups effectively. The committee also highlighted a rise in complaints about banking services, indicating a nearly 50% increase in grievances. They advised on creating better systems for addressing these complaints and ensuring that bank accounts remain active and secure from fraud.