On March 31, the Finance Ministry announced quarterly interest rates for small savings schemes. He restored the rates after a few hours. The government had earlier cut major rates of interest. For example, the rates of Senior Citizen Savings Scheme (SCSS) were reduced from 7.4 per cent to 6.5 per cent. In the case of PPF, the rate was reduced from 7.1 per cent to 6.5 per cent.
There was a general perception after the decision to cut interest rates was reversed. That was that this decision was taken in view of the elections. Some economists criticized this decision. They said that these rates are linked to the market. It is correct to subtract them along the lines of the gilt rate. Then the interest rates should not be reduced to any extent.
The government should ensure that senior citizens get special deals in terms of interest rate. The reason is that they do not have any other means of income. Interest rates are decreasing in the economy. There is nothing wrong in lowering interest rates with schemes used to raise capital. However, SCSS should be seen as an exception to this.
for the elderly to invest in SCSS. It is not used to generate compound interest rate. Nor to become rich. However, it is like a source of income. The minimum age to invest in the scheme is 60 years. A maximum of Rs 15 lakh can be put into it. Apart from this, the interest income is fully taxable.
I believe that the interest rate should increase on the Senior Citizen Savings Scheme. Also, there is a need to increase the investment limit. Many reasons account for this. Where low inflation and interest rates have a positive effect on economic growth. At the same time, people who have retired do not benefit from it. They have passed through the period of earning and increasing it. Most retirees invest only in fixed income options. This means that low interest rates are not beneficial for them. The truth is that it hurts them. The reason is that the rate of personal inflation is always more than the rate of formal inflation.
It is ironic that the people talking about the system of market-linking are those people who have never really depended on such deposits. Those who implement it are also those who get guaranteed pension. It keeps on increasing with inflation.