SOCIAL COST OF LOW PPF RATE: Chat Room, Economic Times

Oct 06 2015 : The Economic Times (Mumbai)
Chat Room

Social Cost of Low PPF Rate
This refers to reports that the government may link PPF returns to bank deposits and RBI rates. Those who are responsible to pay interest have every right to bring down the rates to their advantage. But those who have invested their savings with a long-term perspective should not be given a shock, just because there is a temporary change in the movement of wholesale prices. Some analysts console savers that returns on investments are now `positive' with inflation getting tamed. May be true. But one is yet to come across a single household budget that has shrunk because prices have come down in the recent past.
A downward revision of the small savings rates will move savers from safe and secure investments to riskier avenues that will involve a social cost to the nation in the long run.Further, will government's own market borrowings and resource mobilisation be sustainable, if the rates are linked to RBI's repo rates or deposit rates of banks, and if the SLR of banks and funds with EPFO, LIC, etc, will no longer remain a captive source?

M G WARRIER Mumbai

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