M G Warrier

Indecent propositions*

This refers to your editorial “Unkindest cut” (Business Line, August 7). Public memory may be short. But savers who keep their savings in banks they trust cannot be expected to forget why they chose bank deposits as an instrument of savings, in the first place. State bank of India and major private sector banks have been challenging the commonsense of two categories of savers particularly, since the beginning of the current decade. The savers they have been taking for granted are, (a) elders who keep their ‘retirement corpus’ in bank deposits and (b) the High Net-worth salaried class who maintain huge balances in savings bank accounts.
In 2011, when after long persuasion by depositors, RBI deregulated interest rates on Savings Bank accounts, these banks made a mockery of the regulator’s guidance by either just ignoring the RBI circular (banks like SBI) or making new stipulations and fixing new thresholds for payment of interest on SB accounts (big private sector banks), ensuring status quo in outgo on account of interest payments.
The message has been loud and clear. Savers will remain at the mercy of banks. While media and analysts dwell in detail on inflation, RBI’s base rates and inadequate transmission of benefits of rate cuts, savers remain a neglected lot. To add insult to injury, banks bargain for reduction of interest rates on savings instruments with long term maturities outside the banking system as a pre-condition for reduction in lending rates following reduction in bank rate. GOI has been obliging.
This indecent challenge from banks which have a monopoly over rural and semi-urban savings has long-term implications. These include savings migrating to non-financial sectors and the traditional moneylender resurfacing in new attire. Earlier the regulator and GOI wake up, the better.
M G Warrier, Mumbai
*A slightly edited version has been published in the Hindu Business Line, August 8, 2017.


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