The strong observations by the parliamentary standing committee on finance echo the protests of the helpless subscribers to the cuts in interest rates on various small savings schemes. The rude shock administered by the Narendra Modi government’s well-heeled finance minister, Arun Jaitley, earlier this year included cuts in the Public Provident Fund interest rate to 8.1 per cent, on Kisan Vikas Patra to 7.8 per cent from 8.7 per cent, on the PM’s favourite girl-child saving scheme Sukanya Samriddhi Account to 8.6 per cent from 9.2 per cent, and senior citizen savings scheme to 8.6 per cent from 9.3 per cent with effect from April 1.
It remains to be seen whether the rates will be restored if Parliament agrees with the committee. Mr Jaitley has given all sorts of excuses for cutting the rates which, he says, are among the highest in the world, but provided no back-up figures for this. It is true that India has one of the highest rates on deposits. Further, he says, you cannot have a situation where small savings rates are higher than bank deposit rates. Where in the world, he asks, do you get a 12.5 per cent return of interest?
“So if deposit rates become 12.5 per cent, then what should lending rates be, 14 to 15 per cent,” he wondered. Mr Jaitley says India would become the most sluggish economy in the world if lending rates are 14 to 15 per cent. As though interest rates on small savings are a component of a sluggish economy!
The main reason is to bail out lazy bankers who claim they find it difficult to get deposits as people prefer small savings, which give them higher returns. The small savings schemes account for just Rs 7 lakh crore, barely a fraction of the '90 lakh crore deposits in the total banking system. The figures tell the true story of this lazy banking.
The panel has rightfully pointed out that with individual ceilings savers cannot in any case allocate unlimited funds to these schemes. It is easier to bully subscribers who are a scattered lot and have no trade unions to pressure the government. Parliament is their only hope because, far from putting Rs 15 lakh — as per Prime Minister Narendra Modi’s poll promise — into every bank account as it were, his government is hurting the pockets of the people by reducing interest rates on small savings.
A month has passed since the rates were cut. How many banks have brought down their lending rates? Perhaps RBI governor Raghuram Rajan, who is in favour of lower small savings rates, will look into how far the banks have lowered their interest rates?
