Confusion again on special interest rates for senior citizens
Even after nearly three months of the approval of the 2016 budget, the Government is yet to enact revenue bills and issue necessary circulars, gazette notifications and guide lines to implement its proposals including the special interest rates for deposits from senior citizens. There is also a lot of confusion over some budget proposals. The Central Bank (CB) has sought guidance from the Finance Ministry to implement the 15 per cent rate of interest to be paid on fixed deposits of senior citizens proposed by Minister Ravi Karunanayake in the 2016 Budget presented last November.
The Business Times (BT) has received many letters and telephone calls asking why or when this proposal would be implemented. “Last year too it took many months to implement a similar proposal. Why are the authorities indifferent to senior citizens,” asked one elderly BT reader. At least two commercial banks said they are yet to receive the circular from the CB but such a response from banks also reflected the prevailing confusion as according to the budget proposal, the facility only applies to Licensed Finance Companies (LFCs). This is what Mr. Karunanayake said in the budget:
“Fixed Deposits of Senior Citizens: At present the 15 per cent interest rate offered to senior citizens is limited to Rs.1 million and only to citizens above 60 years. I propose to expand this benefit to citizens above 55 years of age and the 15 per cent interest rate to be applicable to deposits up to
Rs.1.5 million. This facility will be granted through Licensed Finance Companies where an interest subsidy of 1.5 per cent will be granted by the Government. I propose to allocate Rs. 1,500 million for this purpose. I note that (the) Central Bank guarantee of deposits should increase the confidence of the depositors.
“Official sources said the lack of clarity in budget proposals and tax amendments (like the above) has caused delays in the Finance Ministry issuing circulars and necessary guidelines. As a result, they said Sri Lanka’s revenue targets for the year 2016 will go haywire owing to these delays. A senior tax consultant told the BT that finance bills necessary to implement tax proposals of the budget should normally be tabled in Parliament two weeks before votes are taken for them. It should be passed in parliament to make these new tax collections a law, he said adding that if it cannot be enacted during the current fiscal year, then it could be included in the next budget for the implementation with retrospective effect.
However, he noted that the targeted revenue for the current fiscal year cannot be collected without passing those finance bills in parliament. Last year too, the special interest rate for senior citizens became a muddle with circulars from the CB flying to and fro after the proposal was altered twice. It was some pressure from BT reports and letters from elderly depositors that finally the authorities to clear the ambiguities and launch the scheme in March after the January 2015 budget presentation. There was an earlier proposal on similar lines in the budget presented in late 2014 by then President cum Finance Minister Mahinda Rajapaksa.
According to a March 2015 circular to commercial banks, all senior citizens - irrespective of how much they have in fixed deposits – were eligible to open a fixed deposit at 15 per cent interest on an amount not exceeding Rs.1 million.However this year’s proposal applies only to finance companies though commercial banks, following calls made by the BT, have been led to believe that this scheme is applicable to banks too.
(Bandula)