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Interest on savings scheme for senior citizens  

I am a senior citizen and I closed my account in Senior Citizens Saving Scheme, because of the more attractive interest now available from banks. The account was closed on the 15th of the month. I was not given interest for the fortnight. I was told that interest is payable only for completed months. Since I had received on closure of some other deposit proportionate interest till the date of withdrawal, proportionate interest should have been made compulsory for deposits under the rules for Senior Citizens Savings Scheme.

In any savings scheme, one has to go by the rules governing the scheme. Senior Citizen Savings Scheme provides for withdrawal interest at 9 per cent on March 31, June 30, September 30 and December 31.

The rate of interest is stipulated to be “annual”. Interest should be available upto the date of withdrawal, unless completed month had been made the basis under the Rules. Rules are silent in this regard.

But there is a case for claiming interest till the date of withdrawal under the scheme. Since the rules are uniformly applied for all deposit offices as prescribed in the Rules, the interpretation in this regard has to be uniform for all deposit officers (banks).

A clarification may be requested from the Central Government. If the rule lacks clarity, it can also be amended by the Government. It is for the depositor to choose such scheme taking overall assessment of the effective rate of interest taking into consideration, the tax benefit. Whether interest is paid monthly or proportionately to the number of days in the month may not make much difference. It is also possible for a person to postpone the withdrawal to the end of the month, if possible, in such cases. There are different rules of reckoning interest payment for different deposits.

Another reader has suggested that interest rate at 9 per cent being low compared to the market rate, the rate of interest should be enhanced or premature closure of deposit should be permitted without loss of interest for such pre-closure. There is a lock-in period of one year. The amount can be withdrawn after the end of five years of deposit. It can be closed after one year.

Withdrawal during second year will be after deduction of 1.5 per cent of the deposit, while the withdrawal thereafter will be subject to deduction at one per cent of deposit. Senior Citizens Savings Scheme, it is pointed out, is meant for the welfare of the senior citizens, but when it turns out to be not beneficial to the senior citizens, remedy is required by suitable amendment to the scheme.

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