8% IS NOW 7.75% - NOT CLOSED!

about 2 years ago
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By Ruma Dubey

 

Today is the last day. Cannot help but feel like saying, “rush, rush, rush!!!”

One of the safest products for retail investors, especially senior citizens and those looking for a fixed income – the 8% GOI Savings Bond, 2003 will stop taking subscriptions from today. The announcement was very abrupt ad overnight.

With other saving schemes like PPF, post office giving rates of much below 8%, this was one of the most popular schemes.Every month some Rs.1500 to 2000 crore came into this scheme; in fact many have shifted from FDs to these bonds. This product had a sovereign rating, came with a tenure of 6 years and minimum investment was for Rs.1000 with no cap on maximum investment. With an interest rate of 8%, obviously, it was more popular than the current FDs which currently offer between 6.25% to 6.75%. It has the option of cumulative as well as non-cumulative option of interest payment with majority opting for the half yearly interest payment mode.

There was a big hue and cry, making one wonder why the Govt was hitting the senior citizens so bad? But instead of issuing a clear statement saying that it is stopping 8% and coming with another rate, it simply created confusion by saying it is stopped. Probably wanted to judge the reactions on the social media?

Well, today, the Govt has issued a clarification that the scheme has not been shut down as was being feared – only the interest rate has been changed; everything else remains same. Obviously, rate has come down. It is now called the 7.75% GOI Bond scheme. This continues to remain higher than the FDs and just 25 bps lower than the earlier 8%.  

The Govt and financial analysts, logically, have agreed that this HAD TO BE DONE! The rates were cut to align the bank fixed deposit rates with the small savings rate. Why? They say it is create to a level playing field, which is right as this higher payment would obviously go from the tax payers kitty. With fiscal deficit situation looking scary, every penny saved will make a huge difference.

The financial circles might be happy with this move but amongst the masses, the rage has only risen. Interest on this and other small savings is the only source of income for many. With cost of basic necessities of life itself on the surge, even on 8% and above interest rate, survival was a task. Now with these sharp slashes across the board, what happens to so many living on interest income?

This rate cut, especially in the current atmosphere of ‘dirty dozen’ and many more such corporate honchos milking the banking system dry, comes as  a tight slap once again on the face of the common man. The banks and the corporates, who are today responsible for the plight of the entire banking sector today are not punished; not a single defaulting promoter is in jail nor is a single bank employee who has connived with the company chiefs to siphon off underserved loans.

We are paying a cess on Swachcha Bharat; where exactly is that money going? We do not see any cleanliness anywhere…if it begins with the people to keep the city clean then why the cess? We are paying more for any service, right from eating out to getting a pest control done. Our money gets us so much less; the value has dropped.

This might be the right move to have made, economically yes but politically and even socially, this is a move which will haunt the Govt as it is pinching the people where it hurts the most. The rich are always taken care of and the poor will now get inundated with welfare schemes as 2019 comes calling. What about us, the teeming middle class who actually make India what it is today?

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