K.C. Chakrabarty, deputy governor, RBI, indicated reduction in government-administered small savings schemes in near future.
The reduction in the rates of small savings will help the banks in lowering the lending rates and the deposit rates. Commenting on the same, Dr. Chakrabarty said, "A slight increase or decrease in the small savings rate will not greatly affect bank deposits, but this is a directional issue."
Bankers reason, small savings schemes like, PPF and postal deposit schemes offer an interest rate of around 8 percent a year and tend to compete with bank term deposits. Considering this, bankers have refrained from any marked reduction in the deposit and lending rates, in spite of persistent union pressure.
"When the government is giving a certain interest rate on small savings, it is not logically correct for banks to provide a lower rate of interest. When we are saying that interest rates are coming down, that means the small savings rate should also come down," said Dr. Chakrabarty.
Former chairman and managing director of Punjab National Bank, Dr. Kamalesh Chandra Chakrabarty took over as 51st the Deputy Governor of RBI on 15th of this month. Dr. Chakrabarty was duly notified by the union for his appointment as the deputy governor of RBI, in an order dated June 5, 2009 for a period of three years.