P. Chidambaram (right) with bankers at a pre-budget meeting in New Delhi on Monday. (PTI)
New Delhi, Jan. 7: Bankers today made a strong case for paying interest rates on current account deposits before finance minister P. Chidambaram. This will help to mobilise idle funds with business houses, they told the finance minister in a pre-budget meeting with him.
Business houses and traders use current accounts, which have little restrictions on the value and number of transactions. For banks, these accounts are one of the most inexpensive source of deposits because they don’t have to pay interest. Lenders pay 4-6 per cent interest on savings account deposits.
“The Reserve Bank should allow some interest... something like 2 per cent to be paid on current accounts... that will encourage more people to put (money in banks) instead of keeping the money in cash. It (interest rate) will help to attract money in current accounts,” State Bank of India chairman Pratip Chaudhuri said after the meeting.
According to industry data, the current account deposit base of large banks has shrunk in the first three months of 2012-13 from the preceding quarter.
Bankers have also sought permission to issue tax-free bonds to raise funds and augment business.
“Some of the banks... made a request that they should also be allowed to issue tax-free bonds as has been allowed to other financial institutions because banks have good distribution network and can finance infrastructure projects,” Chaudhuri said.
The chiefs of banks demanded the reduction of the lock-in period for tax-saving deposits to three years from five years to channelise more funds into the banking sector.
“Tax-saving bonds are already there (with banks), tax-saving deposits are already there. So there was a requirement that this lock-in period should be reduced from five years to three years on tax-saving deposits to bring it in line with tax-saving ELSS (equity-linked saving schemes),” he said.
A suggestion has been made to increase the TDS ceiling for term deposits to Rs 25,000 from Rs 10,000.
The bankers said gold imports were connected to jewellery exports and any efforts to bring down inbound shipments would affect the export of jewellery.
“Any restriction on gold import should be done carefully and in a calibrated manner because it has a correlation with jewellery export,” Chaudhuri said.