Recently a friend narrated a story to me and much to my horror an ominous sense of Deja vu engulfed my emotions from six years back. In a surreal rerun of what had happened with my family, my friend told me, a week after his father passed, the priority banking ‘relationship’ managers (RM) of their (private) bank visited the bereaved family to express their condolences.
Tea and polite conversations followed there after the RMs dropped a bomb — RBI rules, they told his mother, who just lost her partner of four decades, would make it difficult for my friend, an only child and the sole nominee to all accounts, to get automatically bumped up as the second account holder by default. My friend was already fully KYC-ed by the bank but apparently a new rule called FATCA made this mandatory.
It gets progressively worse. The banker went on to suggest that decades-old fixed deposits that have been earning double digit rates and were on the verge of maturing over a period of 24-60 months, should get broken and reinvested in new ones that earn half.
Last checked, FATCA or The Foreign Account Tax Compliance Act is tax information reporting regime, which requires financial institutions like banks to identify their US accounts through enhanced due diligence reviews and report them periodically to the U.S. tax man or relevant authorities. As per US Internal Revenue Service (IRS) rulebook, US. taxpayers who hold foreign financial assets with an aggregate value of more than the reporting threshold (at least $50,000) have to declare and attach with the taxpayer’s annual income tax return. My friend carries an Indian passport, has no foreign assets and last visited New York 5 years ago.
Many professionals in this country — like my friend or me — live and work in a different city than their parents. Like my mom, several senior citizens have a mind block when it comes to technology and lack self-confidence, that’s got hastened post-Covid. These aged consumers are harassed and harangued by many of our banks who instead of helping, obfuscate, missell and misdirect them. The best of private, public and foreign banks are complicit.
Finance Minister Nirmala Sitharaman began the direct tax proposals in her 2021 budget speech by offering her ‘pranaam to our senior citizens’. She promised to reduce compliance burden and exempted pensioners who live on interest income from filing their income tax returns. This was commendable. But a different, harsh reality continues to exist for India’s senior banking customers.The RBI rulebook, twisted at will, by target-chasing bank executives, has a new ruse: Covid. Take the example of doorstep banking. It’s one of the key attractions for the elderly — nervous, ailing, lonely and often financially gullible — to open a priority ‘senior citizen-friendly’ accounts to avail the sheer convenience of the promise. Last month, when another relatives mother was hospitalised, a visit to the home branch revealed the service has been discontinued for joint account-holders. Would you agree, most middle class families have joint account for the same reason — convenience and flexibility of usage.
In an April 2021 State Bank of India (SBI) Ecowrap report (bit.ly/3F1Sle7), Soumya Kanti Ghosh found it tough to get hold of data for size-wise term deposits of senior citizens. So instead, he relied on estimates for the number of senior citizens term deposits accounts and amount. In September 2019, he estimated there are about 41 million senior citizens term deposits accounts with a total deposit of Rs14 lakh crore (7% of India’s GDP). More importantly, this 20% of the Rs70 lakh crore retail deposits belong to individuals, as per RBI’s March 2019 data. That’s not insignificant.
In total, there were Rs128 lakh crore of total deposits in FY2020. The average deposit size per senior citizen account was around Rs3.3 lakh, and interest income from such deposits formed 5.5% of private final consumption expenditure in FY2019, as per Ghosh’s calculations. He also informed me that finding updated data is a tough task.
With multiple service providers, platforms, services constantly tempting consumers to ‘buy now, pay later’, earn coins, or go all digital, can one really expect most people over 60 to cope up? This proliferation also makes them vulnerable to scamsters. At times, I wonder thank god they are tech challenged.
The most cynical excuse many private bankers rely upon is that the senior citizens are an unproductive cohort. This lot can’t be cross-sold mutual funds, credit cards, and insurance. Return on these accounts are diminishing while senior citizens still deposit money with the banks. And data shows, these returns make for a fifth of the total retail deposit base – which may not be as high as that of a Gen Z upstart, but still not immaterial. Moreover, most banks do have a minimum deposit threshold.
Our silver citizens deserve dignity. We can fight back those aggressive hard sells by our banks. Alas our parents can’t.
