- Date : 22/11/2019
- Read: 2 mins
The economy is going through a low-interest rate regime due to which over 4 crore pensioners are losing Rs 5,845 annually.
Falling interest rates in the country are affecting pensioners greatly. The State Bank of India (SBI) conducted a study to emphasise on this fact. It estimated that the falling interest rates have caused the pensioners to lose an average of Rs 5,845 annually.
This average loss in the annual interest income is taking into account the interest rate drop from 8.5% in 2015, which amounted to Rs 28,390, to the present interest rate of 6.75%, which amounts to Rs 22,545. Hence, an annual loss of Rs 5,845 is suffered by the pensioners.
SBI stated that there are over 4 crore pensioners with an average term deposit of Rs 3.34 lakh each. The low interest rate income has a direct impact on the private final consumption expenditure, a measure of consumption in a country. This net impact is estimated at 0.3%.
The RBI has cut interest rates five consecutive times to boost growth due to which the economy is facing a low interest rate regime. Inflation has also remained low for an extended period, negatively affecting the real monthly interest returns of the pensioners.
At the beginning of the year, the RBI’s key policy rate was 6.5%, which has been reduced now by 135 base points to 5.15%. During this period, the deposit rates for most banks have dropped by an average of 1%.
The study by SBI supported full tax rebated on the Senior Citizens Savings Scheme (SCSS). A senior citizen can deposit Rs 15 lakh under this scheme and get the current interest rate of 8.6%. While this is an attractive interest rate, the downside of the scheme is its lack of tax benefits. The report said, “However, the interest on SCSS is fully taxable which is a major drawback (the interest amount of Rs 1 lakh deposit for five years is around Rs 51,000, which is taxable).”
As reported by the Economic Times, Soumya Kanti Ghosh, the group chief economic adviser of SBI said, “In India, there could be at least 40 million senior citizen accounts with an average deposit size of Rs 3.34 lakh. In a declining interest rate regime, it is just and fair that interest of both depositors and borrowers is treated on par.” Earning a pension? Here are some income tax rules for you