Surprised?? But you can find such interest rate if you are from the below listed countries. In India we hardly find more than 6% savings account interest rate and we struggle to get more. But in reality in some other part of the world we find the savings account interest rates more than 10%.
It is a common expectation of around 8% return from debt products like FDs, PPF, RD, Debt Funds or sometime from Equity 🙂 At the same time we expect more than 10% return from the asset classes like equity or real estate (but I think now lot of investors not hoping the same from Gold). In such a scenario if your savings account is fetching you more than 10% then what will be the economic condition of our country? Is it good or bad? Before proceeding further let us look at countries which are giving more than 10% return for a savings account or on a year term deposit.
1) Ukraine-According to IMF data this country ranks 38th in the year 2010 when it comes to GDP. In this country average savings account interest fetch you around 8% to 15%. Savers can earn around 18% return from one year FD.
2) Mongolia-From this country you can expect return more than a normal equity market i.e 15% return from savings account. But penalty rate is also huge in this country. Suppose you withdraw your amount within a year then a penalty rate will be a staggering 4%.
3) Bangladesh-It is ranked as 44th country in the world. A one year deposit earns you around 12% from HSBC Bangladesh.
4) Vietnam-This country also offers around 10% return from a year deposit.
5) Serbia-This is the country where you can earn more than Vietnam as inflation is bit eased to Vietnam. Return from this country is around 10%. But real return will fetch more than Vietnam.
6) Argentina-One of the highest rate on deposit over the world. One can earn around 22% from a year term deposit. This is more than 90% of what USA investors earn on their Certificate of Deposits.
Now is it a best option to get such a staggering returns from safe investments like FDs? Yes when you not consider the other aspects of economy. The major effect on such high return is “INFLATION”. Have a look at above countries. None of them are neither developed countries nor developing. Their economy is struggling so hard that the inflation rates of above countries are as below.
1) Ukraine Inflation-9%, 2) Mangolia Inflaiton-9.5% 3) Bangladesh Inflation 10.7% 4) Vietnam Inflation-9% 5) Serbia Inflation-7% 6) Argentina Inflation-22%.
These high interest are the effect of inflation, financial instability, central bank actions and currency fluctuations. So considering only the return part is wrong, we need to consider the real return which is also called as the return adjusted to inflation. Hence a person earning from a deposit around 22% but the inflation rate is around 21% then his real return is just 1% but not 22.
So next time before rejoicing the interest rate on your savings account or FDs think the other aspects of the economy and how this return is actually beneficial to you.
Note-Data from Deposits.org.