Tuesday, July 16, 2013

Depositors are treated badly by banks.

It is a fact that savers are treated very badly.It is unfair to expect depositors to cross subsidise the bad borrowers, and the economy by making use of their money for investments in Government securities and bad borrowers who loot the banks.SB rate of interest remains at 4% though it is more than a couple of years the Reserve Bank deregulated SB interest. The FD interest is being brought down as and when the banks get a chance. The present rate is less than 9% per annum when the inflation is around 10%. Apart from difficulties of saving in these days of spiraling inflation and other increased cost of living which include high rents, high education costs, high transportation costs,high medical expenses and miserable  living conditions, people  sacrifice and save a little in banks  for reasons for survival and other social aspects, but the rates are discouraging and taxes have to be paid even on a small interest amount exceeding Rs 10000. While dividends running into crores of Rupees are exempted from taxes, the hard earned savings of people of small means are not allowed to fetch a reasonable rate of return.Banks also fail to come to the rescue of the economy and the people as they do not want to bring down their luxurious expenditures and NIM. The base rate  at around  10% of most of the banks is questionable as they get deposits at less than 6% on an average and they make advances at around 14% and above. The whole system is playing mischief is a fact and savers suffer ultimately.. The Governance system and accountability are major casualties in these days of free for all. Earlier some serious thinking is given and action initiated, the position will move from bad to worse.The banks approach to business and the way they treat depositors need a thorough review before they get damaged beyond repair.

Dr.T.V.Gopalakrishnan
( This comment in a slightly modified form is in response to an article 'Time to treat savers fairly" that appeared in Business standard dated 16/7/2003).

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