The document discusses MCLR (Marginal Cost of Lending Rate) and how it affects loan and deposit interest rates for banks. It notes that while lower MCLR means lower loan interest rates, it can also trigger lower deposit rates, hurting FD (fixed deposit) investors. The document then compares returns from bank FDs to debt mutual funds, noting advantages of debt funds like professional management and potential for higher post-tax returns. It recommends seeking professional help to choose suitable debt funds matching one's investment horizon.

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3. What is MCLR ?
MCLR of a Bank Depends on the following;
Marginal cost of funds
Negative carry on account of CRR
 Operating costs
Tenor premium
Marginal Cost of Lending Rate
Lower the MCLR, lower would be the Loan Interest

4. Barrowers will be Happy… but
Lower the MCLR lower would be the Loan Interest
Lower the MCLR will also trigger reduction in
Deposit rate by the bank, which will hurt the FD
investors.

5. SBI Term Deposit Rates
Data Source: SBI Website

6. 0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
8.00
9.00
10.00
Movement of SBI 1 year Term Deposit Rate for past 27 years
Series1
Data Source: SBI Website

7. Make your Choice Right
In the Era of declining FD rate, you can select DEBT
MUTUAL FUNDS as your vehicle for deploying
your money to create optimal Post tax Returns.

8. The advantages of investing into Debt Mutual
Funds over Traditional Bank Fixed Deposit;
a. Professional Management by the Fund
Manager
b. Probability of Higher Portfolio Returns
c. No Tax deduction at Source
d. Can enjoy Indexation Benefit after 3 years
from the date of investment.
Debt Mutual Funds

9. Capital
FD Debt Fund
Capital100,00,000100,00,000
Pre Tax Return Pre Tax Return9%8%
Capital inclusive of Interest Capital inclusive of Gain1,29,50,2901,25,97,120
CII of 2012 - 2013 Indexation of 2013 - 2014939NA
CII of 2013 - 2014 Indexation of 2014 - 20151024NA
CII of 2014 - 2015 Indexation of 2015 - 20161081NA
CII of 2015 - 2016 Indexation of 2016 - 20171125NA
Capital Capital Post Indexation1,19,80,830NA
Taxable Income Taxable Capital Gain9,69,45925,97,120
Tax @ 30% Tax @20 %1,93,8917,79,136
Post Tax Gain Post Tax Gain27,56,39918,17,984
Assuming ₹ 100 Lakhs is Invested on 1st Jan 2014 and exited on 1st Jan 2017
A
D
I
J
Interest Earned Capital Gains29,50,29025,97,120
B
C
E
H
F
G
= A + C
= ( H / E ) * A
= I - D
DebtMutual Funds vs FD

10. Choice of Debt Funds to invest would
require a professional help to steer clear of
the schemes available and understand their
suitability to your Investment Time horizon.
We would be at your service to guide you
through the investment process…

11. +91 94440 55430 saravanan@purplepond.in www.purplepond.in
PurplePond Investment Advisory (P) Ltd,
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