Lifestyle | Your Money

June 19, 2013

Rate Cut, Savings: Retirees Gain Crumbs

Unheard of! If banks charge lower interest rate, in the order of 25 basis points rate savings turn averaged around 3.4%. They are retirees who depend on interest income on their savings to survive, who will suffer most.

The decrease by 25 basis points, which increased from 4.9% to 4.5%, not unanimous. These are investors who will be most adversely affected by this measure, many observers say. "This measure will discourage savings that is already on a downward slope. This is bad for the Mauritian economy because we need national savings to invest in the country. If we do not have enough money, we will have to borrow from other countries. This will raise our level of debt, "warns Dr. Yusuf Ismail, economist.

Imrith Ramtohul 'Senior Investment Consultant' at Aon Hewitt, also expects a decline in national savings. "This decision is disadvantageous for small investors to the extent that the real interest rate is already negative, or the rate of inflation is much higher than the savings. The situation could therefore worsen the decline. If banks do not revise down their savings rate is good for investors, but otherwise, they will be worse off, "he says.

You should know that with this rate cut, the savings rate practiced by banks fall below 3.5%. "The rates vary between 3.25% and 3.4%. This is the first time we have such a low rate. This is worrying! These are investors including pensioners who need to survive bank interest, which will be most affected, "says Yusuf Ismail. Shared by Eric Ng, Director, Office PluriConseil opinion. "With this decline, the savings rate could fall to 3.4% on average although some banks will practice more or less than the declared rate. But one thing is certain. They are retirees who will suffer the most, are more vulnerable to inflation. Put their money in the bank is the only way for them to save money and deal with rising prices. These are not people who will speculate on the stock market to grow their money, "points out the economist.

Suttyhudeo Tengur, president of the Association for the Protection of the Environment and Consumers (APEC), does not hide his concern. "Besides the fact that it is hardly worth saving and life will become more difficult for retirees, declining savings also shows that Mauritians are struggling to make ends meet because the savings is indicators to measure the standard of living of households, "he said.

Consequences of the declining savings

The decline in savings is not without consequence. "People do not withdraw their savings in the bank even if they are losers and that their purchasing power will decline in real terms. People prefer to consume because the interest they receive on savings are not worth the trouble, "said Eric Ng. Imrith Ramtohul expected, for its part, that part of investors are turning to the stock market and currency to invest their money.

Borrowers are winners

With lower interest rate, borrowers can breathe. "This reduction will benefit the private sector is heavily indebted. This is a measure which seeks to replenish their coffers, "says Suttyhudeo Tengur. "Borrowers bénéfieront this fall if the banks are reviewing their rates," said for his part, Imrith Ramtohul. "We hope that the banks will pass the entire lower repo rate to borrowers," added Yusuf Ismail.

 

 

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