Interest slashed: How long will the guessing game go on?
As depositors, be they short or medium term investors, we are going through a very difficult period of time, not being able to balance our expenditure budgets due to depleted interest income resulting from the continuing monetary policy gimmicks of the government.
It is not that we are disgruntled at the policy, but need to know whether we are reaping the benefits that usually associate with such policies; increase in purchasing power, increase in demand for goods, increase in productivity, increase in employment opportunities. Sadly, they do not seem to unfold before us.
In this backdrop, let me mention a few incidents from a real life situation; my brother who is serving a housing loan with a monthly payment commitment of around Rs.30,000 managed it with ease as his interest income met 90 per cent of his monthly loan commitment. His deposit that matured during the first quarter of the year was renewed under the new interest policy rates and now covers only 40 per cent of his monthly liability. How does he manage the additional burden? It is not that he puts the best of food on the table for his family; it is not that he provides preppy clothing to his school going children, but compelled to manage at the expense of basic necessities of life. How many more frustrated are seething silently?
If the policy is aimed at boosting the private investment, let me also quote another incident; I’m working for an export oriented organization and walked into our official bank (private) to negotiate some short term funds. However, it was after a grueling series of questions targeted at refusing the request, managed to obtain 50 per cent of the requirement with the influence from a top notch of the bank. Also in another incident, I was personally interested in converting my home in Kandy to a holiday home and applied for a loan offering far too excessive collateral. My request was however turned down as they did not have a product to offer a semi-retired professional.
In my opinion, the banking sector must play a pivotal role, if we are to accrue the desired economic benefits from the current interest policy. In this context lending towards the SME sector with liberal views towards the market risks is vital. One could understand the associated market risks in lending towards long term investments with short term money market rates, but cannot understand their obstinate attitudes towards the short term borrowers. Today we see many advertisements published by the banks promoting their credit cards. Bankers levy exorbitant interest rates spanning from 22 per cent to 24 per cent on outstanding credit card balances. What a lucrative business at the expense of poor credit card holders? Credit cards will only limit the spending rather than expanding the purchasing power. As battered depositors, we keep on guessing and praying for a modicum of luck hoping for a policy reversal while the bankers flourish with high profits oblivious of their hindrance to the policy objectives.
Ranjith Alwis
Kandy.