News
Senior citizens’ FDs: Account holders need to show up at banks for renewal every year
The Central Bank (CBSL) has instructed licensed commercial banks to convert senior citizens’ fixed deposit (FD) accounts that fall under the special high interest rate scheme to normal FD accounts — unless the account holders present themselves before the banks and make a written request to extend the scheme by another year.
Accordingly, any senior citizen receiving this benefit, whether bed-ridden or ill, holding such FD accounts that have reached maturity before tomorrow (March 21) will be required to visit their local bank branches prior to March 31 and make a written request for their accounts to be renewed for a further one year. Failure to do will see those senior citizens’ accounts being taken off the special interest scheme.
The CB, though, has not issued operating instructions to banks regarding existing senior citizens’ FD accounts that will reach maturity after March 21.
Senior citizens’ FD accounts that fall under the special high interest rate scheme currently enjoy an interest rate of 15 percent. If they are converted into a normal FD account, this interest rate will fall to about 6-7 percent.
According to new instructions issued by the CBSL, the period of maturity for any senior citizens’ FD accounts opened on or after March 1 this year will be limited to one year. They will no longer be automatically renewed upon reaching maturity. If any account holder who opens a senior citizens’ account on or after that date wants to continue to enjoy the special interest rate scheme, he or she will have to visit their respective bank branch in person and open a fresh FD account valid for another year.
Under the senior citizens’ special interest scheme, a person aged 60 years or above can open an FD account with a maximum deposit limit of Rs. 1.5 million. That account will be subjected to the special 15 percent interest rate. Only one such special FD account can be opened and opening multiple accounts coming under the scheme at different banks is prohibited by law.
The reason for the new operating instructions from the CB to banks regarding these accounts stems from concerns that the scheme is being abused, a CBSL source told the Sunday Times. There is a need to vet account holders who genuinely meet the criteria under the special interest scheme and weed out others who are abusing it, the source claimed.
The CBSL has also instructed banks to immediately halt paying the special interest to any senior citizen account holder if it is found that they don’t fall under the eligibility criteria of the scheme.
Under the new instructions, account holders will also be asked by banks to fill out a sworn affidavit certifying that their date of birth and other details that make them eligible for the special interest scheme are true.
Meanwhile, the new application that account holders fill out to renew their FD accounts also includes a clause that the accounts are liable to be taxed under the Inland Revenue Act or other statutory tax rates.
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