Date:10/05/2006 URL: http://www.thehindubusinessline.com/2006/05/10/stories/2006051002111000.htm

Back Savings bank deposits

The administered interest rate on savings bank deposit was reduced from 4.5 per cent to 3.5 per cent in a low-interest-rate regime.

The other rates have risen but there is no change in the former.

They are mostly owned by the lower middle-class people in terms of number of accounts. The latter are subsidising the interest payments on term deposits.

The rate should be restored to 4.5 per cent. Even then it will be negative in real terms since an inflation rate of 5 per cent is accepted by the central bank.

Banks may be allowed to pay an additional 50 or 100 basis points to senior citizens. The best thing to do is to abolish this last vestige of control without waiting for the next policy review.

A. Seshan

e-mail

Letters to the editor and contributions can be sent by e-mail to: bleditor@thehindu.co.in