Political, public outcry as PPF, NSS and saving scheme rates cut - Moneylife

Political, public outcry as PPF, NSS and saving scheme rates cut - Moneylife


There is an urgent 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 like PPF and various savings options offered under National Savings Schemes. The combined corpus under such schemes 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 assured 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 recent SBI research report suggestion to consider  differential (higher) rates for savings in the accounts of elders and in age-groups above 45 years is worth looking at. Another group which may deserve differential treatment may be those who are not investing in these instruments for income tax benefit.
A related issue is professionalism in management of funds flowing into governments’ kitty which now come from captive sources like LIC, EPFO, banks(SLR deposits), National Savings Schemes and PPF. As these funds are used by government and no investment risk prevalent in money with the banking system is to be factored in, it is natural that savers expect a higher rate of return on investment in such financial instruments. Any thought of relating interest rates on investments in such instruments with bank interests is unacceptable.
M G Warrier, Mumbai


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