Lower Small Savings Interest Rates: Economic Times

Interest rates on small savings
This refers to the editorial “Lower Small Savings Interest Rates” (Economic Times, November 4). Post-liberalisation, resources mobilisation is also about competition. Banks, corporates and government are dependent on domestic savings for funding their business/projects. Once RBI has relented and brought down base rates, reality stares at the users of public funds. Reality is that savers will make choices and will divert savings to investment avenues which they feel are safe, liquid and will fetch a reasonable return.
True, banks have lowered deposit rates after rate cut by RBI. It is also true that banks have been forced to make some cosmetic changes in lending rates (which, some of them have done reluctantly and only time will tell the extent of benefit given to the borrowers). There is nothing wrong in corporates eying small savers as a potential investor-group. But, equity investment is yet to claim the kind of trust among retail investors.
First, LIC, EPFO and NPS should prove to the investing public that they are able to generate returns comparable with safer investment avenues like small savings and PPF by investing in equity. Government also should demonstrate that their market borrowings can sustain without the captive SLR funds from banks and ‘directed’ investments by organisations which it controls.
M G Warrier, Mumbai


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