Letters: Wait for the after-effects

With reference to the editorial, “Cut in savings rates is a sound decision” (March 21), the finance ministry’s move aimed at boosting economic activity could not have come at a better time. However, it would be naive to conclude that the poor and the middle class will gain more from the lower interest rate regime.

Incidentally, while there has always been pressure on the Reserve Bank of India (RBI) to slash interest rates, no one — not even the government — questions the indifferent attitude of the banks, which take their customers for a ride.

The editorial rightly points out that an immediate consequence of the rate cut might be that the government would need to borrow more from the market. But then, how can the government have its cake and eat it too?

The suggestion of the editorial to consider merging the Public Provident Fund with the National Pension System is not a wise one at this juncture. Let us tread the path of economic growth cautiously. Any hasty or imprudent move may bring more peril instead of laurel for the Indian economy. Let us see what after-effects follow the rate cut. The move seeks to address the main grievance of public sector banks that they do not enjoy a level playing field vis-à-vis the deposit rates of government-sponsored small savings schemes. Actually, public sector banks should now properly reduce their lending rates to facilitate effective transmission of any rate cut-oriented future monetary policy of the RBI.

S Kumar, New Delhi

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