Govt. ends senior citizens special 3 % interest scheme
Sri Lanka’s senior citizen interest scheme’s landscape has shifted from direct government-funded high-interest subsidies toward a model of targeted social welfare and the settlement of past financial obligations.
The specialised 3 per cent extra interest scheme for senior citizens, which was one of the cornerstones of the 2025 Budget, has closed its enrollment period on December 31, 2025 and being discounted in 2026.
If a senior citizen has opened a 12-month fixed deposit under this scheme before the end of 2025, he or she will continue to get the subsidised interest till the deposit matures in 2026, a Finance Ministry told the Sunday Times Business.
The 3 per cent extra interest is no more in existence, he said, adding that senior citizens now rely on individual bank-offered rates, which typically range between 7 and 12 per cent depending on the financial institution.
The government overhauled its senior citizen interest subsidy scheme by the end of 2025 following the discovery of significant fiscal mismanagement, including massive cost overruns and Rs. 138 billion in hidden arrears.
An IMF analysis indicates the previous scheme, which saw subsidy costs balloon to over Rs. 63 billion by 2022, was a major source of financial strain.
The ministry was compelled to stop the current programme, instead of focusing on providing support to the vulnerable segment of the population without further distorting the banking sector, the official said.
The government’s involvement in elderly interest rates has evolved through two distinct phases, according to ministry sources:
The 15 per cent interest scheme was introduced in the 2015 Interim Budget where it mandated a 15 per cent interest rate for senior citizens’ deposits up to Rs. 1 million.
This fixed rate became unsustainable as market rates fluctuated. By 2022/2023, the government could no longer pay the required subsidies to banks, leading to a massive buildup of arrears.
The second scheme was in July 2025 where an extra 3 per cent was given to senior citizens seeking to deposit a maximum of Rs. 1 million, which now has been discontinued in 2026.
The 2025 Budget allocated between Rs. 15 billion and Rs. 30 billion to cover this subsidy.
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