SL banks clueless on interest scheme for senior citizens
Complete chaos reigned at some local banks over deposits of senior citizens after last month’s revised budget with many bankers confused at what rate of interest they should accept for fixed deposits by these seniors.
This was while the authorities are dilly dallying on issuing directions to the banks depriving senior citizens of a much-needed boost in their meagre income which could together total millions of rupees.
The new scheme on senior citizens’ interest rate of 15 per cent per annum on Rs.1 million deposits was proposed at the budget in late January.This follows the last regime’s proposal to grant 12 per cent annual interest rate for Rs 2.5 million deposits of citizens over 60 years of age.
Some senior citizens called the Business Times (BT) in desperation for information on the scheme as their efforts to clarify this from the own banks were unsuccessful. “There is no proper information given. When I asked my bank, they said the 15 per cent scheme is still not effective but gave no other information,” said one resident from Mount Lavinia. The BT received several letters from senior citizens reflecting their plight and the loss in income due to the lethargy of the authorities, regulator (Central Bank-CB) and the banks. “The banks are just passing the buck,” said another caller from outside Colombo.
Independent checks by the BT seeking clarity on the scheme of 15 per cent per annum on Rs.1 million deposits revealed that the situation is very unsatisfactory and calls for urgent attention from the Government. BT investigations revealed that many bankers didn’t know how to answer queries from customers clearly due to the lack of proper instructions by the regulator. They are still fielding numerous calls from seniors, some bankers said, adding that they are ‘still’ awaiting that elusive call from the CB, but the CB is yet to give a clear direction.
“Many seniors call us to find out if the new scheme on senior citizens’ interest rate of 15 per cent per annum on Rs.1 million deposits which was proposed at the mini budget is implemented,” a banker told the Business Times.
The overlapping interest rates are puzzling seniors. Sampath Bank, which was least mystified by this new proposal, from the 10 banks that the BT queried from, said that now they grant 12 per cent on Rs. 1 million, which was the previous proposal. Also if a person above 60 years want to withdraw prematurely and open a Rs. 1 million fixed deposit at 12 per cent from an existing fixed deposit (at the 8 per cent rate that Sampath has for seniors), they will not charge a penalty, the BT was told. All other banks said they do. The Sri Lanka Banks’ Association (SLBA) which was to meet the CB on Wednesday seeking clarity on this matter will now meet the CB on Governor Arjuna Mahendran’s return to the island – from an overseas trip – after February 20. Upali de Silva, Secretary SLBA told the Business Times that commercial banks are still awaiting a clear direction from CB. “We are meeting the Governor when he returns on this matter,” he said.
He said SLBA wants clarity on implementing this scheme which Mr. De Silva added that SLBA also want to clarify whether the 12 per cent interest holders are entitled to this new scheme. Those with such deposits won’t be requested to change into the new scheme.
In a eve-of-election bonanza, the CB said the scheme would apply to all licensed banks, operating in Sri Lanka that maintain fixed deposit accounts shall implement this special interest scheme with effect from 1 January 2015. This didn’t happen. CB said at the time that all banks will receive a special bond to be issued by the Government at an interest of 12 per cent per annum, in order to cover the additional interest cost incurred by them, under this scheme. The interest income on these deposits will be exempted from income tax. SLBA will discuss this in detail with CB, according to Mr. De Silva.
According to SLBA data, some 750,000 senior citizens hold accounts in 33 banks worth Rs. 750 billion.