Longer wait for elder citizens seeking higher interest on finance company deposits
Confusion continued for the umpteenth time in the arena of higher interest rates for senior citizens in finance companies as this 2016 budget proposal continued to elude those eligible.
Not surprising since the higher interest scheme for senior citizens has been dogged by issues ever since its introduction in the Mahinda Rajapaksa budget of October 2014.
This week, the Central Bank (CB) said it is yet to receive a Treasury circular, contradicting an earlier statement by a senior bank official, on guidelines for finance companies to pay senior citizens 15 per cent on a Rs. 1.5 million deposit. Two weeks ago, officials said a circular had been issued “We have still not received a circular from the Finance Ministry to direct Licensed Finance Companies (LFCs) to implement this scheme,” a senior official of the CB’s Non-Banking Supervision Department told the Business Times on Thursday.
In the meantime, commercial banks are continuing to offer 15 per cent interest on a Rs.1 million deposit as per the 2015 budget proposal which came into effect in April last year. Though earlier it was thought this scheme was applicable only for one year, banks said that – in the absence of a new circular or clear guidelines – it will continue to pay 15 per cent on Rs. 1 million deposits and automatically renew older deposits when it expires.
Many people have been eagerly awaiting implementation of the scheme through finance companies as senior citizens have been categorised as 55 years and over.
In last year’s higher interest rate scheme, senior citizens were identified as those who are 60 years and over.
But bankers, who declined to be identified, said the delay in implementing the scheme was also due to the cash-strapped government’s inability to allocate funds for the subsidy to finance companies.
Chairman of Finance Houses Association of Sri Lanka, Ravi Yatawara confirmed that modalities in the implementation of this scheme pertaining to finance have so far not been communicated to them.
He told the Business Times that they expect clarity from the CB on reimbursement of additional expense incurring in the payment of high interest rate for elderly citizens as the budget indicates that the Treasury will bear such costs.
“The differential between the existing fixed deposits rate for seniors and the newly imposed 15 per cent should be subsidised by the Treasury,” he said. In the last budget, it was announced that an interest subsidy of 1.5 per cent would be granted by the government to finance companies when higher interest rates are offered.
Ever since the government under the leadership of Mahinda Rajapaksa announced a higher interest rate for senior citizens in the 2015 budget presented on October 2014, the scheme has been dogged by many problems and changes. Then President Rajapaksa announced a 12 per cent rate for deposits of pensioners and elders who have accounts in state banks. That was altered by the new government in an interim budget presented on January 2015, offering 15 per cent interest per annum on a maximum of Rs. 1 million in all commercial banks.
To give effect to the scheme, the CB issued a statement on February 25 saying senior citizens could obtain 15 per cent interest on deposits not exceeding Rs. 1 million while 12 per cent interest was offered to senior citizens under a different segment.
Sixteen days later (on March13), the CB issued a new circular revoking the February 25 notice with some clarifications though most of the earlier guidelines remained.
Now senior citizens are waiting with bated breath for the green light to finance companies to offer 15 per cent interest on deposits of upto Rs. 1.5 million.
| Senior citizens praise Business Times Over the past year since the Business Times began campaigning for quick implementation of budget proposals offering higher interest rates to senior citizens, it has received numerous ‘thank you’ calls from elderly readers.”Please find out what is happening to the proposal involving finance companies. Your paper is the only one interested in this,” one caller said this week, adding that they were unable to get any ‘positive’ information from the Central Bank. Another, who has an aged mother, had a different story. She said that her mother, who passed away late last year, had placed 12 different deposits in two branches of one state bank to make it earlier to withdraw money in case of an emergency. Since her mother was in the late 90s, there were occasions when officers from the bank came home to get the signature of her mother, a reflection of good service. | |