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With deposit rates heading south and the cost of living zooming north, senior citizens want the Government to ensure that they get at least 100-200 basis points higher interest rates on their deposits over and above banks’ prevailing card rate to make ends meet.
For offering higher deposit rates, the Government could incentivise Banks by either giving them tax concession or lowering the deposit insurance premium they pay on senior citizens term deposits, say experts.
According to Reserve Bank of India data, the weighted average domestic term deposit rates (WADTDR) on outstanding rupee term deposits of scheduled commercial banks has come down by 372 basis points from 8.76 per cent in November 2013 to 5.04 per cent in November 2021.
So, on a Rs 1 lakh deposit, earnings have gone down by Rs 3,720 per annum. Lower deposit rates amid stubborn retail inflation are pinching senior citizens hard.
TPR Unny, Secretary-General, All India Senior Citizens Confederation (AISSCON), observed that presently, banks, on average, are giving 50 basis additional interest rates to senior citizens over their card rate.
He opined that Banks should increase the additional interest rate to 150-200 basis points. One basis point is equivalent to 0.01 per cent.
Deposits made by senior citizens are a source of stable deposits for Banks. According to experts, about 20 per cent of deposits in the banking system is from senior citizens.
Banking expert V Viswanathan said Banks could be spurred to offer higher interest rates on senior citizens’ deposits of a minimum of three years duration by reducing the deposit insurance premium to 10 paise per Rs 100 from Rs 12 paise specifically on these deposits.
Further, special renewable energy/green deposit schemes can be offered to senior citizens at attractive interest rates. This money can be used for lending to the renewable energy sector or invested inbonds floated for this purpose.
Full or part of the income derived from such lending (out of the deposits from senior citizens) can be exempted from banks total income, said Viswanathan.
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