With reference to “For a fistful of deposits” ( Business Line , May 16), one of the reasons for slowing of deposit growth in banks is Tax Deducted at Source (TDS).

At present, the interest received on bank deposits is fully taxable and the tax is deducted at source at 10 per cent if the income-tax Permanent Account Number (PAN) is produced, and at 30 per cent, if PAN is not produced.

Small depositors who do not have PAN are scared of depositing money in banks; instead, they park their money with local money-lenders and chit companies.

To help banks mobilise and attract deposits, the interest on bank deposits should be exempted from income-tax. At least, the threshold for TDS should be raised from the present Rs 10,000 a year to Rs 1 lakh.

S. Raghunatha Prabhu

e-mail

Housing mortgage

crisis

This is with reference to “No need for housing mortgage guarantee” ( Business Line , May 17). It is surprising that the author has not mentioned about the housing mortgage fracas in the US. In the US, the housing mortgage guarantee scheme led to recession.

If this scheme is implemented in India, the housing finance companies will compete with each other to provide loans at cheap interest rates and some may even reduce standards of lending.

Thus will be born India's sub-prime mortgage class. Then, another company in the derivative business will, perhaps, start hedging its bets on the housing mortgage market.

As a result, India 's financial health will be at levels even regulatory authorities will not be able to catch on.

Nair Sashi V. C.

Kochi

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