The woes of an Indian urban senior citizen
The woes of an Indian Urban Senior Citizen
(Below created characters and conversations are purely imaginary; might or might not reflect reality; Intention is not to hurt anyone, but to generate a debate. If it hurts anyone, my sincere apologies to him/her)
After the imaginary interview with me on RBI Policy* in April 2025, the late Mr. Art Buchwald (AB) was restless in the heaven. He called me over phone (in my dream) yesterday, to convey that he would like to interview an Indian consumer to confirm the 'rosy' picture of the Indian Economy, as certified by the government, RBI, economic experts, through their statements and opinions. I agreed to his request. Unfortunately, he bumped into an Indian urban senior citizen(USC), known for his (arm chair) expert views on the stock market, mutual funds and economy, but placed his savings, only with the scheduled commercial banks (SCBs) and post office savings schemes.
Excerpts of the (imaginary) interview are as under:
AB: You should be happy that CPI Inflation is down to 2.82% in May 25, especially since the food inflation is going below 1% (0.99%).
USC: I have two daughters. The price of the gold shot up to exponential levels and is nearing Rs.10,000 per gram.(Rs.9,895 on 26.06.25). I have a two wheeler for taking my wife out and also for my purchases. The petrol price, which crossed Rs.100 per litre two years back, was not reduced when the crude oil price came down (from the high of USD 100 levels per barrel) to USD 80 levels. I was hoping that the major oil companies may reduce petrol prices, as the crude oil price was ruling at USD 65 levels recently. But the war in the Middle East between Israel and Iran dashed my hopes. Luckily, due to the consistent ‘intervention theory’ practiced by the US President Trump, there is a pause in the war now. I sincerely hope the major oil companies may not get a chance to increase the oil price again.
In this regard, though the inflation rate growth over the corresponding period of the pervious year has come down for the last three months, the CPI Index at 195.4 in December 2024, as compared to the base year (2012) CPI Index of 100, does indicate that the average annual inflation rate is 7.95% (95.4/12)in the last 12 years. No bank has offered this rate for their deposits in the said period.
AB: (Surprised). Oh! It is a good analysis. Based on the decline in CPI inflation, RBI reduced the repo rate by 100 bps since Feb’ 25. Everyone is upbeat on growth, as individual consumers may go for new loans, use the cash available on account of reduced EMIs towards new spends, the firms/companies may report better cash flows, etc. Do you agree?
USC: RBI MPC reduced the repo rate by 100 bps so as to pass on the benefit to the bank’s borrowers in their lending rates. But the banks have misunderstood that the cost of funds should be reduced first. That is why, if you see, the transmission of interest rates in the bank deposits is higher (27 bps) than the lending rates (17 bps), as per RBI report. In reality, the reduction in the deposit rates is more than 100 bps, when I renew my deposit. My bank friend told me that in savings account, 80% of the balance is treated as a time deposit for a bank’s ALM calculations. Probably, that is why the interest to my savings account is also reduced to 2.5% from 3% earlier.
AB: Interest from the deposits is only a supplement to regular income earned otherwise. Why you crib so much about the small decline in the deposit rates of the banks?
USC: I am worried because some of my investments under senior citizen savings scheme(SCSS)/bank deposits are getting due in the month of July/August. There are rumours that the central government, taking a cue from the cut in the repo rate (leading to reduction in its borrowing programme through g-sec), may reduce the current interest rate on small savings scheme also, including SCSS. Incidentally, I am not privileged to be part of the less than 1% of the Indian population, which enjoys regular monthly pension after retirement. I am also ineligible to get 100 days work contract under NREGA, since I come under the category ‘urban citizen’. So my current living depends on interest received from the bank deposits/SCSS only.
AB: You can invest in equities or Mutual Funds to compensate the loss of interest income from bank deposits.
USC: I never invested in any stocks, till I retired from service. While I try to understand the stock market, what is the meaning of Sensex/NIFTY etc. I find that a regulatory shut down of a banking arm, results in increase in the share price of the parent organisation. And when frauds/financial irregularities are reported by a private bank, the share price goes up. Whether that is due to the regulator’s assurance that the bank is safe or otherwise, I do not know. As a result, I am scared to invest in equities now.
Everyday, I see MF sahi hai advertisement in all the leading TV channels. Hence, I approached the bancassurance representatives in the bank, where I maintain my savings account. They recommended some schemes (concepts like balanced, midcap, small cap, etc. are greek to me), where the arrow in the risk graph, printed on the top of the application, points to high/very high. I am confused. So, I continue to keep my retired savings in the bank FDs/small savings scheme of Indian Post Office.
AB: Just out of curiosity, you should definitely benefit from the Finance Minister Union Budget for FY2025-26, as no one need to pay tax, if his total income in a year do not exceed Rs.12.75 lacs.
USC: Since the interest on bank deposits are already down by more than 100 bps and the likely scenario of reduction in the income from SCSS, my annual income is not likely to exceed the previous ceiling for ‘nil’ tax.
AB: (controlling the tears in his eyes) Normally my readers used to laugh heartily, after reading my article. I am afraid, my interview with you might make, not only my readers, but me also slightly depressed. Is there no benefit at all to consumers on account of RBI reducing the repo rate by 100 bps in the current year?
USC: Since the unsecured personal loans offer the best return to the banks (in view of the higher interest charged on such loans), I heard that the banks, which now extend personal loans to senior citizens against their monthly pension, might come with a new loan product to senior citizens, like me, who survive on the interest income received from their investments. I hope to get a bank loan to cover my deficit in the near future.
AB smiles, shake hands and leaves. My dream ended as I woke up. The next day, AB confided to me (in my dream, of course) that he met his match in the Indian urban senior citizen.
Please wait for AB's next interview
Regards
V.Viswanathan
CGM Retd. e-SBT
25th June 2025
Very hilariously narrated the plight of the middle class. Kudos.
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