The All-India Bank Depositors’ Association has asked the RBI to ensure a real rate of interest of 2.5 to 3 percentage points on a post-tax basis on all term deposits, association president SS Bhandare said on Saturday. “In our discussions with the RBI, we have often emphasised this particular aspect of how depositors’ interests are going to be protected with this kind of a fall in interest rates.”
“In fact, we have also proposed that there should be a real interest rate that is roughly at least 2.5 to 3 percentage points above the consumer price index (CPI), and the CPI should not be taken on a month-to-month basis. It should be based on the average of the last six months.” At present, State Bank of India offers interest at the rate of 6.9% on one-year fixed deposits. With CPI-based inflation clocking 4.2% in October and assuming a tax rate of 30%, this translates to a real interest rate of 0.63%.
Bhandare said the association has proposed that senior citizens holding deposits with a tenure of at least 15 years be entitled to a higher interest rates on deposits up to Rs 25 lakh under the Senior Citizen Saving Scheme. At present, the limit is R15 lakh. He added that the association is pitching for assured deposit rates of 8.5-9% on SCSS deposits. SBI currently offers interest at the rate of 7% for deposits ranging between three years and 10 years. He said that the association backs the government’s move to demonetise notes of Rs 500 and Rs 1,000 denominations and called it a “gamechanger”.