SUGGESTIONS AND SOLUTIONS


  1. The RBI should ensure that the Banks offer better rates of interest on their Deposits during times of inflation in keeping with the changes in the indicative RBI REPO rates.
  2. During times of high inflation the Banks can offer to its existing depositors also either a lump sum amount by way of a Bonus or a rate of interest over and above the existing rates of interest. This will to certain extent mitigate the sufferings of the Depositors due to high cost of living. There should be no necessity to close the existing deposits to avail the higher rates of interest.
  3. Banks should not hesitate to charge a higher rate of interest on their loans in keeping with RBI’s indicative rates so that their spread between the deposit and lending rates are sufficient to yield normal profits.


  1. Thus even if 50% of the growth in profits are given back to depositors by way of increased ROI/ or a bonus it would be a great boon to millions of depositors while at the same time it will not significantly affect the Profitability of the Banks.
  2. The gross discrimination against the small depositors should be stopped immediately and there should be greater equity in the business culture of the Banks.
  3. The Bank Depositors should come together under an Organisation to voice their concerns and demands so that all the authorities will look into their grievances.
  4. The Government and the RBI should take steps to protect the interests of the small depositors and should once again emphasise the objectives for which the Banks were Nationalised and also extend them to cover all the Banks including the Private and foreign banks. There is greater need for EQUITY and JUSTICE to the GENERAL CLASS OF DEPOSITORS whose faith in the Banking Sector has immensely helped in the country’s economic growth.


  1. The system of Tax Deduction at Source on interest paid on Bank Deposits should be totally done away with. The Indian Banks Association should forcefully take up this matter with the Government. The Income Tax Authorities should advice all the Bank depositors to include the interest earned on bank deposits in their I.T. Returns while computing the taxable income and pay tax wherever necessary.
  2. In order to boost the savings habit the Government can even give tax exemption on interest paid on bank deposits if not fully at least to the extent of say Rs.300000 from the entire banking system. This is fully justified and equitable considering that the Government has exempted from Tax the Dividend paid by the Limited Companies on their Shares and also the returns from investment in Mutual Funds which largely benefit the wealthy and very rich people. Thus the tax exemption on interest paid by Banks will benefit the small depositors, who as already mentioned in this paper are the Back Bone of the Banking system.

Tag: For a full analyses of the problems of Bank Depositors read detailed article "Bank Depositors - a Discriminated Class" in


Kaushik Vichar

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