Senior citizens’ 15 per cent interest scheme faces chaotic state of affairs
The senior citizens’ 15 per cent interest scheme on a deposit of Rs.1 million announced in last year’s budget 2015 which was then extended to Rs.1.5 million in the 2016 budget benefiting elders of 55 years and over, has run into all kinds of problems.
The Business Times has repeatedly highlighted the need for the government to implement this proposal based on pleas of depositors but no action has been taken to implement the 2016 proposal – which was for finance companies to follow.
However when this matter was brought to the notice of Finance Minister Ravi Karunanayake during a TV talk show on November 21, an angry Ministry vehemently denied the non implementation of the proposal saying a sum of Rs. 1.7 billion has already been allocated for this purpose. But the actual sum allocated from the budget 2016 was Rs. 1.5 billion.
Later he was made to understand that the proposal is yet to be implemented even after 10 months. The Minister then vowed to take necessary action against officials who were responsible for the delay in granting this benefit for elders.
Senior citizens, already getting 15 per cent interest on a deposit of Rs.1 million under the scheme announced in the interim 2015 budget continue to enjoy this facility up to now as the Treasury has undertaken the task of reimbursing money spent to pay 3 per cent of the 15 per cent interest for banks.
But the 2016 budget proposal to expand this benefit for citizens above 55 years of age and the 15 per cent interest rate to be applicable to deposits up to Rs.1.5 million (through finance companies) has failed to see the light of the day up to now.
The Central Bank has not sent the necessary circular to banks as they have yet to receive the Finance Ministry circular to be sent to the CB after issuing the gazette notification to take necessary action towards the implementation of the budget proposal.
Although the Treasury has prepared the operational instructions and made other necessary arrangements, it has not received a directive from the top to go ahead with the 2016 budget proposal due to a discrepancy and lack of clarity in the relevant budget proposal.
Modalities of providing this facility for finance companies are yet to be finalised but some Treasury top brass were not in favour of doling out public money to finance companies, informed sources said.
In the absence of clear instructions, commercial banks have been, this year, renewing deposits of senior citizens’ accounts that were placed at 15 per cent interest under the earlier budget proposal.
The Finance Ministry is now grappling to remedy the situation under the present circumstances as it has to reimburse the higher interest rate granted to senior citizens’ fixed deposits to the banks this year.
The Treasury has paid the rebate every quarter until the end of December 31, 2015. The Treasury has delayed the payment of rebate blaming the banks of inflating their claims based on interest rates that prevailed at the beginning of 2015, which were extremely low.
Under this set up, the banks have no alternative other than the suspension of 15 per cent interest rate for senior citizens until they get their reimbursement from the Treasury, a senior bank official on condition of anonymity told the Business Times.