Thu, 28 Mar 2024 Today's Paper

CB caps senior citizen deposits to Rs.1mn at 12%

19 January 2015 04:00 am - 1     - {{hitsCtrl.values.hits}}

A A A

The Central Bank last week informed all commercial banks in the country to cap the single senior citizen’s deposit value to Rs.1 million from the previously announced maximum of Rs.2.5 million, a Central Bank source told Mirror Business.



The measure was taken as per New Democratic Front’s election manifesto which promised to offer a higher interest rate up to Rs.1 million of the deposit value of senior citizens in the country.Central Bank’s Bank Supervision Department took instant measures to inform all banks last week of the new development and has advised the banks not proceed with the previous guidelines issued in line with the 2015 budget proposals.In an earlier instance, the apex body of the banking fraternity, the Sri Lanka Banks’Association said, there were at least close to Rs.700 billion senior citizen deposits in the banking system.


However, t he capping of t he maximum deposit limit would now likely to lessen the amount that qualify to receive the12 percent additional interest.
The newly elected President, Maithreepala Sirisena’s manifesto however promised 15 percent interest on senior citizen deposits, out-doing the previous government’s 12 percent offer, in a bid to lure senior citizens’ franchise amid many other populist giveaways.Among others were the relaxation of custom duties of 10 selected essential food items, increase of public servant salaries by Rs.10,000 and a Rs.3,500 monthly allowance for retirees till their salary anomalies are settled.


The proposed salary increase alone is estimated to weigh the government coffers by a thumping Rs.204 billion a year. However, in the absence of credible and practical revenue generating measures, the new government is likely to end up with a serious fiscal slippage, probably leading to austerity measures.
Meanwhile, it appears that the Central Bank is now at crossroads as the monetary authority is still contemplating ways and means of financing this additional interest rate offered to the senior citizens by the banks.


Although it was earlier proposed to issue a bond to the banks offering a matching interest rate, the Central Bank now feels the option is not plausible due to practical issues.Hence the bank is now considering an interest re-financing scheme (or a subsidy scheme) to bridge the senior citizen deposit rate and the bank’s average cost of funds.


Mirror Business learns that Central Bank’s contribution to the subsidy is unlikely to exceed 4 percent. Meanwhile, Commercial Bank PLC Chairman Dharma Dheerasinghe said, the subsidy rate must be equivalent at least to the total of the bank’s average cost of funds and the cost of intermediation, the cost which a bank incurs in offering its services.Central Bank’s top officers are currently deliberating on the matter and are confident that they will be able to come up with solutions to these problems, as to how to offer 15 percent and how to subsidize the banks who offer such rates.


However, a significantly higher deposit rate for a targeted group in the economy when theAverage Weighted Fixed Deposit Rate (AWDR) is hovering around 7.33 percent and the headline inflation is around 2.1 percent (in December year-onyear) appear to be clear indicators of anomalies created in the economy over a period of time.The Central Bank is of the belief that once the proposed reduction of the taxes on essential items as well as petroleum products come into effect, benefits will accrue to the entire economy, thus lesser hard times for pensioners.

Order Gifts and Flowers to Sri Lanka. See Kapruka's top selling online shopping categories such as Toys, Grocery, Kids Toys, Birthday Cakes, Fruits, Chocolates, Clothing and Electronics. Also see Kapruka's unique online services such as Money Remittence,Astrology, Courier/Delivery, Medicine Delivery and over 700 top brands. Also get products from Amazon & Ebay via Kapruka Gloabal Shop into Sri Lanka

  Comments - 1

Order Gifts and Flowers to Sri Lanka. See Kapruka's top selling online shopping categories such as Toys, Grocery, Kids Toys, Birthday Cakes, Fruits, Chocolates, Clothing and Electronics. Also see Kapruka's unique online services such as Money Remittence,Astrology, Courier/Delivery, Medicine Delivery and over 700 top brands. Also get products from Amazon & Ebay via Kapruka Gloabal Shop into Sri Lanka
  • sacre blieu Tuesday, 20 January 2015 09:03 AM

    No response by the banks to the promissed 15% and they are offering only 12%. Maybe the lower profit by this would effect the bottom line and disturb other issues and priviledges.


Add comment

Comments will be edited (grammar, spelling and slang) and authorized at the discretion of Daily Mirror online. The website also has the right not to publish selected comments.

Reply To:

Name - Reply Comment





Order Gifts and Flowers to Sri Lanka. See Kapruka's top selling online shopping categories such as Toys, Grocery, Kids Toys, Birthday Cakes, Fruits, Chocolates, Clothing and Electronics. Also see Kapruka's unique online services such as Money Remittence,Astrology, Courier/Delivery, Medicine Delivery and over 700 top brands. Also get products from Amazon & Ebay via Kapruka Gloabal Shop into Sri Lanka

VAT increase: SOUNDs death knell for publishers, readers

Though the Government imposed VAT (Value Added Tax) on vegetables and other e

How female change-makers are driving Sri Lanka’s energy saving platform

Saving energy has become more of a responsibility than a habit in today’s c

A dull Ramadan awaits Muslims amidst the Soaring Cost of Living

In the coming days, Muslims across the world will welcome the Holy Month of R

New wildlife underpass to curtail HEC

As of February 2024, Sri Lanka lost another 38 elephants as a result of the H