Falling interest rates hit pensioners
TIMES NEWS NETWORK
New Delhi:20.11.2019
Pensioners have been hit hard by the trend of falling interest rates in the country. A study conducted by the country’s largest lender the State Bank of India estimated that pensioners have lost an average ₹5,845 annually due to the falling interest rate regime.
Taking the argument forward, it said considering that there are more than 4 crore pensioners, who have average term deposits of ₹3.34 lakh per account, the net impact on private final consumption expenditure — a barometer for consumption — due to low interest income is estimated at 0.3%.
The annual interest income at the rate of 8.5% in 2015 worked out to ₹28,390 and the present interest income at the rate of 6.75% was estimated at ₹22,545, which shows a loss of ₹5,845 annually.
The economy is passing through a low interest rate regime with RBI cutting rates for five consecutive times to boost growth. Inflation has also remained benign and low for a sustained period, hurting the real monthly returns of pensioners. RBI has reduced its key policy rate by 135 basis points from 6.5% at the beginning of the year to 5.15%. Deposit rates during the same period have come down by an average of 1% for most banks.
The SBI study backed the idea of according full tax rebate on the Senior Citizens Savings scheme (SCSS). Under this scheme a senior citizen can depoit ₹15 lakh and the current interest rate is 8.6%. “However, the interest on SCSS is fully taxable which is a major drawback ( the interest amount of ₹1 lakh deposit for 5 years is around ₹51,000, which is taxable),” the report said.
TIMES NEWS NETWORK
New Delhi:20.11.2019
Pensioners have been hit hard by the trend of falling interest rates in the country. A study conducted by the country’s largest lender the State Bank of India estimated that pensioners have lost an average ₹5,845 annually due to the falling interest rate regime.
Taking the argument forward, it said considering that there are more than 4 crore pensioners, who have average term deposits of ₹3.34 lakh per account, the net impact on private final consumption expenditure — a barometer for consumption — due to low interest income is estimated at 0.3%.
The annual interest income at the rate of 8.5% in 2015 worked out to ₹28,390 and the present interest income at the rate of 6.75% was estimated at ₹22,545, which shows a loss of ₹5,845 annually.
The economy is passing through a low interest rate regime with RBI cutting rates for five consecutive times to boost growth. Inflation has also remained benign and low for a sustained period, hurting the real monthly returns of pensioners. RBI has reduced its key policy rate by 135 basis points from 6.5% at the beginning of the year to 5.15%. Deposit rates during the same period have come down by an average of 1% for most banks.
The SBI study backed the idea of according full tax rebate on the Senior Citizens Savings scheme (SCSS). Under this scheme a senior citizen can depoit ₹15 lakh and the current interest rate is 8.6%. “However, the interest on SCSS is fully taxable which is a major drawback ( the interest amount of ₹1 lakh deposit for 5 years is around ₹51,000, which is taxable),” the report said.
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