Why don’t banks issue Fixed Deposit ETF’s, like GOVT. issue bonds?
Would have made the whole thing a lot easier, plus a demat holder can easily raise margin based on these FD etf’s.
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I think one of the reason why FDs are so popular is because of their simplicity. You put X and your get Y% returns. No interest rate risk, no price fluctuations etc. You don’t have to wake up in the morning to see a price fluctuation and get a heartburn.
Also, for an ETF to hold something, the underlying has to to be tradeable and FDs are not. A better alternative would be an ETF that purely holds short term instruments like Tbills and commerical papers for which there is an active debt market.
In fact, there are plenty of ultra-short term treasury ETFs in the US. Traders use them tactically to move between cash and take positions. During the recent bout of volatility in November & December, these ETFs say record inflows
https://www.bloomberg.com/news/articles/2018-12-28/etf-buyers-race-to-short-term-treasuries-as-yield-curve-flattens
There aren’t any in India because ETFs aren’t that popular…yet. Reason being you need a demat buy and sell ETFs and only about 3-4% of Indians invest in the markets of which a smaller subset are traders of which a much smaller subset understand ETFs. But maybe someday we will see this. Reason being there are already ultra-short term mutual funds, its just a matter of time before someone packages these in an ETF wrapper.
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