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Bandula reassures Senior Citizens that their interest rates will not fall as special Seniors’ deposits will still pay higher rate

The National Savings Bank (NSB) is one of six licensed specialized banks operating in Sri Lanka. Source: NSB Photo.

ECONOMYNEXT- The government has not done any changes to the interest rates in senior citizen’s accounts, Minister Bandula Gunawardena said today.

The minister said that the Finance Ministry has officially announced that there haven’t been any changes to relief given to the bank accounts of senior citizens.

Recent media reports stated that the government has decided to reduce interest rates for senior citizen account to 8% from the current 15% rate while removing tax relief on their interest income.

He said that the relief program to provide higher interest rates to senior citizen accounts than the market rates began in 2014 under then-President and Finance Minister Mahinda Rajapaksa.

Gunawardena said when banks pay a higher interest for senior citizen accounts than the normal market rates then the treasury refinances the difference in the interest payment to the respective banks

Moreover, he said media reports claiming that the tax relief on the interest income for senior citizens has been removed is not true.

He added that the Prime Minister Mahinda Rajapaksa as the Finance Minister of the current government gave a tax relief package where all incomes including interest income and rental income are free from income tax up to Rs 250,000 monthly and Rs 3 million annually.

However this higher interest rate is given only to one deposit of Rs 1.5 mn per person. Interest rates on additional deposits will fall.

With the Central Bank reducing the Statutory Reserve Ratio from 4% to 2% last month, it released over Rs 100 bn into the banking system which led the country’s excess liquidity in money markets to soar to a historic high of Rs 223 bn.

With this move, economists said that senior citizen incomes will take a hit as interests rates on Fixed Deposits are set to fall steeply.

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Former Deputy Governor of CBSL W.A. Wijewardene tweeted that this move will have multiple repercussions “such as depositors getting less” (Colombo/July7/2020)

Reported by Imesh Ranasinghe