PROTECT SMALL SAVERS' INTERESTS
PROTECT SMALL SAVERS' INTERESTS
This refers to the report
“Jaitley questions high interest rates on savings” (The Hindu, July 10). As the
occasion was a function at which the majority of the audience must have been
stakeholders in equity market, a reasonable bias in FM’s speech to promote
non-cash savings is understandable. But the questions raised by him need to be
answered.
Jaitley is right when he
says that a substantial portion of India’s domestic savings that get converted
as deposits in banks and post offices which also include savings mobilised by
GOI via PPF, National Savings Schemes, EPF and similar routes. A part of these
get back into GOI’s resources for investment through government’s market
borrowing route which is sustained by statutory provisions (e.g. SLR deposits
of banks).
Interest is the rent on
the cash savings the saver gets. As the original investment does not appreciate
in value as in the case of investment in real estate or gold, the depreciation
in value also need to be factored in in the interest rate. Simply put, the
depositor is entitled for a positive interest rate, net of inflation. It is
easy to confuse common man by comparing interest rates in India with those
prevailing in countries where inflation is low or ‘negative’.
The finance minister’s
reference to ‘pension funds’ and equity market as an alternative avenue for
savers to invest their funds makes a valid point. For that retail investors’
trust has to be built up by making available investor-friendly financial
instruments. Small savers in India are more aware of the risks involved in
investments in equity market. Incidentally, government is yet to move towards a
dependable retail market for its own offerings and GOI’s own organisations like
EPFO are not allowed to invest in equity market freely. GOI’s fund management
leaves much to be desired.
M
G Warrier, Mumbai
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