Not many in India would see things the way you do. Why lose interest if you can get it, particularly if you don't have more interest coming in from mutual funds or someplace else? If anything, the competition is on to see who'll pay more interest. One payments bank announced 7%: http://economictimes.indiatimes.com/wealth/personal-finance-...
What's the post inflation adjusted interest rate? Because simply moving your money to a low inflation currency does the same thing.
The only catch is that the payments banks, which do not offer loans and several other facilities offered by full fledged rivals, are not allowed to accept deposits beyond Rs 1 lakh in bank accounts, which will have the same number as your mobile number. Bharti Airtel chairman Sunil Bharti Mittal said that the higher interest rate and freebies such as life insurance of up to Rs 1 lakh was an "introductory offer" and the rates would go down in a falling interest rate environment
Ahh, nm. This is just a fixed amount of cash they hand you for switching banks not a full time interest rate.
Moving money to a low inflation currency sounds good in theory, but is not an accessible solution to the average Indian, and is fraught with bureaucracy and fees even for those it is accessible to. I put my money in a liquid fund (debt mutual fund) to earn 8% nominal interest rate. That's a much more practical solution than moving it to dollars, say.
Airtel's offer may be temporary, and interest rates rarely go to 7%, but the point is that there's always a competition on interest rates.
India's inflation and nominal interest rates are both higher, which means you lose more if you forgo interest. In a hypothetical country with 5% inflation and a 5% interest rate, if you forgo interest, you lose 5% every year. In a country with 2% inflation and 2% interest rate, you lose only 2%.
Different countries have different interest rates. While most developed countries have both inflation rates and bank deposit rates close to zero, there are a few countries with high inflation and high interest rates.
The higher interest rate covers the higher inflation. Currencies are very well arbitraged already, I wouldn't expect any inefficiencies to profit from.
"We find that deviations from the covered interest rate parity condition (CIP) imply large,
persistent, and systematic arbitrage opportunities in one of the largest asset markets in the
world. Contrary to the common view, these deviations for major currencies are not explained
away by credit risk or transaction costs."
backed in the sense of too-big-to-fail. Otherwise, deposits of only upto Rs 100,000/- are insured, that too per person, irrespective of how many bank accounts. Insured in the sense that if bank tanks, Customers will get back minimum (of deposit or) 100,000 Ruppees back after all the bankruptcy proceedings.