Delays in implementing the budget-approved higher interest rate of 15 per cent for deposits of senior citizens strongly suggest the existence of quite a few teething problems in the new administration. Dozens of senior citizens have been sent from pillar to post in the past three weeks in their bid to ascertain from banks whether [...]

The Sunday Times Sri Lanka

No relief for senior citizens on new interest rates


Delays in implementing the budget-approved higher interest rate of 15 per cent for deposits of senior citizens strongly suggest the existence of quite a few teething problems in the new administration.

Dozens of senior citizens have been sent from pillar to post in the past three weeks in their bid to ascertain from banks whether the 15 per cent interest rate payment for senior citizens (60 years +) on one million-rupee deposits is in force or not.It was the same run-around when former President Mahinda Rajapaksa’s recent November budget offered an interest rate of 12 per cent on Rs.2.5 million deposits – later to be reduced to a maximum of Rs. 1 million.

After much hemming and hawing, the banks began to accept these high-interest deposits only to suspend it when the new budget proposal was announced.

In the past banks have been offering all kinds of ‘exciting’ products to senior citizens to grab a share of their growing business. However when it came to an interest rate hike, the response at bank counters were far from being warm, sincere and friendly to this category of customers. Some customers complained of banks being indifferent and disinterested when they requested information on the new interest rate.

Elder citizens, from the plethora of letters received by the Business Times over the past few years ever since the collapse of a string of finance companies and with it the hard earned savings of these people, have always been given a shoddy deal by the authorities. This newspaper has often argued in their favour for a fair deal for these citizens to help them through in the evening of their lives,

From Golden Key, F&G, CIFL and many other companies that failed, elderly depositors have either lost their money or got just a fraction of their capital. Many have died from depression and ill-health in the past few years but unhappily not drawn the attention, sufficiently, of governments, present and past, to find a solution to these outstanding issues.

Leave aside the past, at least in the latest budget proposal no one seems to care enough to order the immediate implementation of the 15 per cent interest rate scheme. The Finance Ministry, the Central Bank and the banks are just passing the buck. And, this is in the context of a segment of society that has a total Rs. 750 billion in deposits from 750,000 customers.

While other budget issues, possibly due to the backing or more powerful groups, have found justice after making demands, justice for these elders in society who were once the cog wheels of a nation in its development path, have been forgotten by all and sundry. This is unfortunate because even the JVP, the most dominant group in demanding action against the corrupt and fighting for the rights of others in a ‘Lone Ranger’-kind of campaign, hasn’t raised the 15 per cent issue.

For example the JVP joined the chorus of protests by a group of people who placed orders (LCs) long before the budget to import hybrid cars only to find that an increased tax in the budget meant they have to pay more for their vehicles on delivery.

As a result of the protests, the Finance Minister changed the goalposts on deadlines and provided some concessions.

The country’s elders have no one to represent them and as a result have been pouring their woes through the newspapers particularly the Business Times seeking justice. Banks and finance ministry officials are twiddling their thumbs passing the buck waiting for a directive. According to reports, the Treasury is awaiting the return of the Finance Minister while the Central Bank and the commercial banks are awaiting the return of the Central Bank Governor for a decision to be made, both from trips to Washington. While the waiting game goes on – for three weeks now – senior citizens are disgusted by the apathy, courtesy and disinterest shown to them.

The delay could also be attributed to banks seeking financial guarantees from the Government to make up for any losses. The interest rate regime works on the principle of lending rates being higher than borrowing rates and the high interest rates for senior citizens poses a problem.
Economists like Prof. S.S. Colombage, a retired central banker, – while conceding that he too benefits from this proposal – have consistently argued that the Central Bank should move away from fixing interest rates and leave it to the market to decide based on supply and demand.
That should be a long term goal. As the law and regulation stands now, the implementing authority – the Central Bank – needs to issue a directive without delay.

In the first place there was no reasonable necessity to seek clarification or clarity on the proposal as the earlier 12 per cent interest rate proposal (from the 7-8 per cent that senior citizens were getting) was already being enforced. So 15 per cent was a bit more than the November proposal. Even if there were clarifications, banks could have informed customers that subject to clarification on issues like whether there is a penal interest on pulling out a deposit and opening a new one etc, the 15 per cent interest deposit rate should have been allowed.

The government and the opposition voting in favour of the budget mean they endorsed every proposal in the budget including this proposal.
Ironically when it comes to collecting ‘immediate effect’ taxes, the authorities are quick on the draw with no excuses given for late payments. The same yardstick should be applied to the senior citizens special rate on deposits.

As stated earlier, many elders have died in vain owing to the problems with their deposits in failed companies and low interest rates with mounting medical bills to pay and the rising cost of food.

Earlier this week the Prime Minister intervened in an issue where the Defence and Media Ministry had blocked the import of an issue of Frontline magazine which contained an old interview with slain Tigers leader Velupillai Prabhakaran, and ordered that it be released to the market.
Doesn’t this more humane issue, affecting the lives of many elders, merit such an intervention?

Considering the service to the nation by these elder citizens, many who have contributed in numerous ways to Sri Lanka’s development, this group of Sri Lankans should not be treated as if they don’t exist. They deserve better.

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