People over 45 should get a higher PPF interest rate, says SBI report

People over 45 should get a higher PPF interest rate, says SBI report: Suggests linking interest to long-term bank deposit rates for those under 45


March 20, 2016

Differential rates for social security savings

This refers to the report “People over 45 should get a higher PPF interest rate, says SBI report” and your editorial “Unkind cut”* (The Hindu Business Line, March 20, 2016). Together, these two articles highlight the need to have a re-look at the approach of GOI to retirement savings. It is unfortunate that different pressure groups argue for reducing rate of return on savings from different angles and GOI succumb to such pressures without weighing the impact on social security cover for which savers invest in most of the long term savings instruments.
PPF and various savings options offered under National Savings Schemes together constitute less than 10 per cent of the deposits with banks. Beyond tax savings, investors under these schemes look at their stable nature in regard to security of investments and regular returns. Considering their role in providing financial security for elders and acting as a source of liquidity when earnings fluctuate in the present uncertain employment market, there is a strong case for ensuring a rate of return on such investments, higher than that available on bank deposits. The SBI suggestion to consider differential rates for savings in the accounts of elders and in age-groups above 45 is worth considering. Another group which may deserve differential treatment may be those who are not investing in these instruments for income tax benefit.

M G Warrier, Mumbai

*Please see next post.


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