New Delhi: Finance Minister P Chidambaram told the Lok Sabha on Friday that while the government proposes to rationalise interest rates on small savings taking into account the inflation rate, it will ensure a higher rate of return on such savings for
senior citizens.
Replying to a spate of supplementaries during question hour relating to bonus on Monthly Income Accounts, Chidambaram, however, said the government’s decision not to pay bonus on the deposits made under the Post Office Monthly Income Account will not impact the growth of small savings nor adversely affect the interest of small savers.
The Finance Minister said the effective rate of return on small savings works out to 8.27 per cent and to senior citizens it was nine per cent, which were decent, taking into account the fact that inflation rate was low and ranged between 4 to 5 per cent.
"These are one of the highest rates of interest in the market."
In this connection, Chidambaram categorically stated that the government does not propose to hike the rate of interest on small savings or for senior citizens.
He said hiking the rate of interest increases the cost of borrowings, which will hit the productive sectors of the economy.
Chidambaram cited the example of Japan where the rate of interest ranged between 0 to 0.4 per cent and said the country must eventually move to these levels to remain competitive globally.
He clarified that bonus would not be paid on the deposits made in accounts opened on or after February 13, 2006 under POMIA scheme.
However, deposits in accounts opened before February 13, 2006 would continue to be eligible for bonus as hitherto.
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