Since the latter half of nineties our country is compelled to follow the modern western economic dictates.
That principle is : ' not saving, but spending boost s economy'. Their interest is purely commercial and made and propagated in their favour via the colossal multinational corporate.
This can be amply proved by the loud cry for decreasing the interest rates for borrowings. There is no sound given against the decrease in deposit interest rates.
When the spread (gap) between the deposit rates and loan interest rates become very less, banks tend to get low profit or even loss. So they will naturally lower the deposit rates as there will be resistance from the corporate borrowers and lobbies.
So the new economic mantra is to borrow and spend and enjoy. That is why EMIs, credit cards, and many other financial derivatives are designed and propagated with smart and tempting marketing strategies.
Naturally low deposit interest drive small savers to other avenues promising more return, but which are more risky. The big business and large multinational corporate thus enjoy money from small savers through financial markets and boost their profit without the need to pay interest to the banks.
The irony, however, is that there is no ceiling limit for the profit making by such large business and corporate.
Just like there is control in the interest rates, there should be statutory control in profit margins. Then only there will be fair and level playing field for all and individual an economy will grow.
The present scenario brings me to some earlier situation:
I remember that during the nineties or so (when Sri Chidambram was the Finance Minister), he brought in some drastic changes in interest rates, rate slabs and period slabs. He coined some unique terms. It was at the behest o some international banks and some new generation private banks who opened business a little earlier. That caused great imbalance for the nationalised banks, and their plea against the' teaser rates' was not heard. Unwillingly they followed suit .But when the nationalised banks entered the scene, the private and multinationals lost their edge and they cried for withdrawal of the reforms, which the FM has to accede.
I smell a similarity now also.
If we take the inflation rate(practically the price rise for consumers) the return is negative. That is not good for long run. I am of the view that this is a wrong step and can cause havoc to the stability of our economy in the long run when people would have shed their savings habit by constant reduction of deposit returns.