“Falling interest rates, dilemma of senior citizens”
View(s):I was impressed by the article titled as above by ‘very Senior Citizen, Kohuwela’ appearing under ‘Letters’ in your Business Times of Sunday April 13 thank you very much for publishing same.
In fact this has been a ‘burning issue’ for the majority of senior citizens and I would like to add some significant concerns in this regard.
Firstly, it is quite a coincidence that the same paper has reported that the Banking sector has recorded a Profit before Tax of Rs.74.6 Billion in 2013!
As we know, while the main source of revenue of the finance sector is interest income, there has been a growing concern about high lending rates and its impact on growth in business and industry. In fairness to the Central Bank, it has attempted to address this issue by controlling deposit rates. However, what one cannot understand is, does a service industry with a primary objective of supporting the economic growth of a country have to earn such high profits? It’s a known fact that these profits are possible only through high margins. Isn’t this the most significant reason for high lending rates? Sadly both the depositor and borrower have to suffer as a result. This is not all. High non-performing advances due to poor credit management, high operational, marketing, promotional and infrastructure cost which, in today’s context, is closely associated with this industry too have a bearing on the overall cost. I do not have to elaborate on media promotions, customer get-togethers and cocktails, frequent upgrading of buildings and interiors as these are no secret.
Why is the customer penalised for all this? Senior citizens are those who have served Sri Lanka during their day making notable contributions towards its economic development in many ways whereas many would certainly have contributed significantly towards the tax revenue of the country (PAYE) throughout their long careers. Those employed in the private sector are generally not entitled to a pension and, not knowing whether they would find employment after the age of 55, have been putting aside some of their earnings for survival after retirement. Therefore they have been contributing towards the savings base of the country for long years whilst some may have also contributed towards its Withholding Tax revenue, as well (and may be continuing to do so even after retirement).
Today the mere existence of these senior citizens who depend mainly (perhaps solely) on interest income generated through their savings for a basic living, is threatened. Many of the banks who once offered an additional interest of 1 per cent for senior citizen depositors have slashed this by half along with the reducing interest rates whereas some others don’t offer special rates at all, adding to the misery.
It is also pertinent to mention that the Central Bank implemented a Bonus Payment to senior citizens by its operating Instructions titled “Scheme of Payment of 20% Bonus for Senior Citizens on their rupee deposits in licensed banks” effective from 1st January 2010, when rates of interest were reduced such as today.
I too join the previous writer in appealing to the authorities to reconsider interest rates applicable to senior citizens depositors who are undergoing immense hardships despite a lifetime of toil and sacrifice at least by permitting the banks to offer a minimum rate of 10 per cent per year and also by raising the Withholding Tax income threshold across the banking and finance industry. After all those who are of the age of 55 years and over make up for only a mere 17.7 per cent (July 2013) of the total population of Sri Lanka (Source: Index Mundi- Sri Lanka Demographics Profile 2013).
Another Senior
Citizen in distress
Colombo