Augment household savings
Apropos of the editorial “Financial savings illusion” (FE, September 19), at a time when the government is rapidly moving with economic reforms to push growth, it is essential to look for augmenting household savings to finance economic growth. Despite having sound financial market and financial institutions dealing in multi-financial products and services, a major chunk of the remittances from non-residents is being channelled for investments in unproductive sectors. This tendency has to be reversed. Owing to the rising level of stressed assets and increased cost of borrowings, credit expansion is tepid and is resulting into sluggish revival in investment. At this juncture, the government and the banking industry have to look at implementing attractive savings products in terms of returns and liquidity to augment people’s appetite to save. Obviously, for banks, it is unviable to raise rate of interest on deposit on account of growing bad assets. However, by taking advantage of the optimum use of technology, if banks go aggressively for curtailing operating expenses and recovering bad assets, it would become feasible for them to offer attractive returns on deposits. Consequently, household savings would rise and it could be deployed for financing growth activities. Banks have to be proactive and the government must support them by making attractive the returns on various schemes including the recently introduced gold monetising and bond schemes to enhance household savings. Also, the accounts opened under Jan-Dhan Yojana need to be monitored to step up the volume of household savings.
VSK Pillai, Kottayam
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