Last week ago, I wrote about the rumoured reduction in the interest rate that the government pays on small savings schemes like PPF, Senior Citizens Savings the various Post Office products and some others.
I had argued that for some schemes, particularly the girl child and the senior citizens scheme, higher rates should be maintained. The push for lower rates comes from banks who need cheap deposits and want to reduce competition from these schemes. Basically, having frittered away huge amounts of capital in bad loans, bankers now want small savers to finance them for a pittance. I must point out that this is not a particularly popular view with businesses, banks, and the economic commentariat, all of whom talk in unison of the small depositor as a freeloader who is taking away money that is desperately needed for something or the other.
They should take a look at some of the responses to last week's column. Senior citizens, non-pensioners who depend on savings sustained themselves write of their problems. Some of the points that they all mention are a real inflation far higher than the official rate, huge medical expenses caused by failure of the public healthcare system, a system that looks after the governments' own, and the poor and the rich but leaves the barely middle class out in the cold. The massive pay commission giveaways and the inflation-linked pensions of government employees worsen the relative penury that retirees perceive.
In the run-up to the budget, if the Finance Minister listens to bankers and businessmen, but not to the small saver, then that will be a tragedy.
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