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Wednesday, December 10, 2014

Reverse Interest - pay money to keep deposit in Bank

The common has lifetime plans. Common man earns salary – ever thinking of that annual pay hike, only to be outdone by some reasons and the ever increasing prices – struggling to strike a balance. The savings would be meagre – but some would rush to bank for placing a small FD and earn interest. He dreams that with the interest the deposits would double in a span of time – and as he ages, he would have reasonable funds in his name.  The Branch Manager and Officials would be ever busy attending to people who take loans and not caring enough for this ordinary mortal placing a Fixed deposit.  There could be mistakes [even in the Name] in the Receipt given, getting TDS could be a task, it could even get credited to wrong account – and one has to pay Income tax on this interest income.

You are looking at a 56-storey, 259 m (850 ft) skyscraper in the Innenstadt district of Frankfurt, Germany. Anantenna spire with a signal light on top gives the tower a total height of 300.1 m (985 ft). It is the tallest building in Frankfurt, the tallest building in Germany and the second tallest building in the European Union.  It is called Commerce towers – that of Commerzbank AG, a global banking and financial services company founded in 1870 with its headquarters in Frankfurt Germany. Commerzbank is Germany's second-largest bank, holding a nationwide network of branch offices, numerous offshore branch offices and representations in more than 50 countries globally. The Commerzbank Tower (designed by British architect Norman Foster) was Europe's first ecological skyscraper too. 

Not a great news for the Investors though it may not affect the common man …….. instead of earning interest on money left with the ECB, banks are charged by the central bank to park their cash with it. The ECB recently had  cut its deposit rate to -0.1% with  the hope is that this will encourage the banks to stop hoarding money, and instead lend more to each other, to consumers, and to businesses, in turn boosting the broader economy.  In theory it sounds attractive but it has never been attempted by the eurozone and could have unpredictable and unintended consequences.  

~ and is that way of punishing savers and rewarding borrowers ?  - it is reported that Germany's Commerzbank is to charge big corporate clients fees if they hold substantial deposits at the bank. Commerzbank is the first major bank to make such a move and says it will encourage big clients to move cash into alternative investments. Ast of now, Private savers and small and medium sized businesses will not be affected by the policy.

In June the European Central Bank (ECB) said that banks would have to pay to park money at the central bank. That negative interest rate was an effort to spur banks and other financial institutions to lend money rather than leave it on deposit. In September it made holding money at the ECB even less attractive by cutting the rate on overnight deposits to minus 0.2%.

Commerzbank's has become the first private bank to mirror that move. "We reserve the right to charge some large corporates a fee on parked liquidity" Commerzbank said in a statement.

Hopefully Indian Finance Minister is not reading such news…. !!
With regards – S. Sampathkumar

21st Nov. 2014.

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