Monday, October 2, 2017

Catastrophe of bank interest rates – 23

Continues from the previous post -
Government often treats funds by public in these safe deposit and recurring deposit as it is property of that bank. This behavior is unjust to all depositors as their funds are exploited for uses to what their prior permission is not taken, this amount to cheating and theft by government. Banks are forced to do many charitable activities by government; all these must stop. When bank takes money for safe deposit or recurring deposits banks do not take such permission and so this is breach of trust by both bank as well as government. Depositors must be treated as sleeping partners in the business of banking and given due rights in the business.
From available records from years, 2011 to 2012 and 2015 to 2016, the share of deposits in the household financial savings has come down. Nevertheless, it remains a major part of how people save. If interest rates on deposits come down, people need to save more to meet their savings goal. This means lesser consumption, market suffers, which has an impact on economic growth. There is also a possibility of not saving enough and not meeting their savings goal, which again is not a good thing. This could mean not having an adequate amount of money for the education of children, among other things. On one side, costs are rising and income reduced makes it impossible for middle class to put more money in FDs and RDs. Reducing bank deposits makes the bank short of funds for business. The complete circle of financial moment suffers. As a result, often depression and inflation effect we experience. When we had in the past, proper balance in bank deposit interest rates and loan interest rates we never had depression or inflations in India, this fact we must not forget to note. Only after suicidal reduction in interest rates, were introduced; and we were forced to put our money in stock exchange where gamblers have free field ordinary investors began to feel the pinch. To work in these markets one has to be well versed in that market. It is a full time business to be successful in those markets. This is not possible for ordinary people who have savings accounts.
Bad loans owned by the government would sharply increase. As most experts predict. However, this is not a new thing since most loans of government are bad loans because government has a tool of taxation to manage them by additional taxes.

Continues in the next post –
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