‘Small savings rates cut to please bankers?’ House panel asks Govt
Concerned over a "drastic" cut in small savings rate, a Parliamentary panel has asked the government to address the concerns of small savers particularly senior citizens and PPF account holders while reviewing such rates. "This drastic reset in small saving rates also appears to have been triggered by the demand from bankers for a level playing field vis-a-vis bank deposit rates," the Standing Committee on Finance said in a report.
"However, in the view of the Committee, this threat from small savings may be over-stated, as small savings schemes (with about Rs 7 lakh crore) manage only a fraction of the funds parked as bank deposits (about Rs 90 lakh crore)," it added. "The Committee would therefore recommend that the government should address the genuine concern of small savers, particularly senior citizens and PPF holders while reviewing the interest rates," the report said. The government has recently announced a significant reduction in 'small savings' interest rates comprising postal savings schemes, senior citizen savings scheme and Public Provident Fund to bring them in line with comparable bank fixed deposit interest rates.
While resetting these administered rates for 2016-17, the government has chosen to prune them across the board tilting the scales against the small saver, the committee said. The government has moved to a quarterly reset of rates instead of the annual reset specifically suggested by the Shyamala Gopinath Committee to shield savers from excessive rate volatility.
The Committee pointed out that with rates on even long-term schemes such as the Public Provident Fund now set to float up and down every quarter, savers will find it difficult to make long-term financial plans. On government's decision to promote lateral induction of talent in PSU banks, the Committee said," It is unable to comprehend the rationale of the assumption that talent from the private sector banks are better to shoulder the responsibilities of MDs and CEOs in Public Sector Banks through lateral induction."
The Committee noted that the objectives of nationalisation of banks include channelisation of banking resources and services for social priorities unlike that of the private banks that are mainly focused on making profits.