Though VRS benefits were lucrative, the uncertainties over whether bank managements were going to accept their applications or not might not have helped them to plan for the future. However, flush with hard cash and other opportunities, it is now time for VRS optees to take stock and think about hot investment opportunities.

Now, they must be wondering which instruments would be ideal to invest their monies in to fetch maximum returns. It might be pertinent to recall that an individual VRS taker in the public-sector banks gets around Rs 13-15 lakh on average.

Seizing this opportunity, a few asset management companies have taken definite steps to tap the VRS-kitty. Says Sun F&C Asset Management (I) Pvt Ltd's chief executive officer Nikhil Khattau: "VRS recipients should be looking at the safest way of investment. It is not advisable to investment in equities in order to make short-term gains. Fixed income plans would be the ideal instruments for small investors. We are exploring products, which, if implemented, would required changes in Sebi regulations. For the time being, we have schemes like MIBP with which to tap market potential."VRS optees, however, seem to have a tough time deciding on investment avenues especially at this point of time as there has been a cut in the savings rate by 150 basis points and the market is in turmoil after the crisis in the bourses.

Adding to investors' woes, the reduction in interest income over Rs 2,500 per annum into the 10 per cent tax deducted at source (TDS) net, a conservative investor would definitely have to look beyond these traditional investment avenues.

Small savings, which have been the most popular investment instruments over the years, have now lost their sheen. Its not likely that retirees are rushing in to put their monies in banks' fixed deposits schemes or small savings accounts.

Says Manjusri Bose of Allahabad Bank: "I would like to invest in those instruments which can give maximum returns. I do not know which would fetch me the maximum, but certainly, I do not want to put my money into equities. I've strong reservations against the equity market... and this became more acute after the crisis on the bourses. Small savings is not likely to be most profitable option. I have to think about alternatives."

No wonder that individuals are mulling alternate investment opportunities now! This is bound to happen after the southward revision of interest rates by 150 basis points announced by the finance minister in his recent budget speech.

In this changing environment, other fixed income instruments including government securities (GoI-Secs) could be an alternative for small-investors. But people seem to be lacking knowledge regarding GoI-Secs.Despite the fact that GoI-Secs have generally offered higher returns than bank deposits, even before the rate-cut in the small savings segment - the weighted average yield on GoI-Secs stood higher than the maximum interest offered on bank deposits - investors have run shy from investing in this segment. As the theory goes, lack of interest in GoI-Secs is only due to inadequate information flow about GoI-Secs.

Though primary dealers (PDs) are taking definite steps to get into retailing GoI-Secs to give the necessary fillip to the debt market, it is unlikely that these initiatives on the PDs' part would have an immediate impact on VRS-takers' choice of portfolio.

However, a diversified kitty might be the ideal for optimising returns. Says Creditcapital Asset Management Company Ltd's head (western region) Nayan S Parekh: "We are trying to make investors understand the need for portfolio diversification. Ideally, the investment portfolio should be diversified into different instruments like government securities, money market funds, debt funds and equities. However, diversification plans can only be recommended after knowing the individual investor's needs."

Meanwhile, the Unit Trust of India (UTI) has planned to come up with a debt oriented scheme intending towards the VRS optees. Says UTI's chief general manager SS Nayak: "The proposed scheme has been filed with the Securities and Exchange Board of India (Sebi) for its approval. It would help VRS optees maintain a regular income stream." The scheme would also offer a unique feature where an employer can invest on behalf of his employees.Mutual funds have also a significant role to play in tapping potential markets. Sundaram Newton AMC has `Sundaram Bond Saver' which offers a regular income option under the systematic withdrawal plan.

More players have jumped on to the bandwagon to offer various schemes for the VRS optees. "The VRS market has huge potential and this is likely to grow in the future as institutions are on a spree to rationalise their organisational structure," Mr Khattau noted. However, quite a few like Suparna Dasgupta of Bank of India did not have to face the dilemma. Optees from the Bank of India, Syndicate Bank, Punjab National Bank, which had closed there schemes for quite some time now, and paid there staffs well ahead of the budget announcement, had already invest there monies in fixed deposits or monthly income schemes with the earlier rate of 11 per cent. But, they were the lucky few!