Bank depositors and senior citizens need protection but who is listening ?

Full protection of individual bank deposits for senior citizens, total exemption from income-tax on interest on bank deposits for those above 70 and an increase in Old Age pension are needed urgently

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Nantoo Banerjee

Even as campaigning in the five poll-bound states reach fever pitch, there is little public debate over the need for providing social security to people. Secure jobs are becoming fewer but while government servants are protected with DA linked family pension up to Rs 1.25 lakhs a month, most senior citizens are left to fend for themselves. The generous old age pension of Rs 500 a month, which most state governments offer since 2007, reach less than a quarter of the elderly and amount to Rs 93 at today's prices. And those who saved for old age are now getting less interest payment on bank deposits and are also being taxed on the interest they receive to sustain themselves.

Even individual bank deposits are not fully protected. India is among the countries that offer the lowest protection to depositors in cases of bank failure. Depositors' insurance covers only Rs 5 lakh per bank account, a level way below that of developed countries and even of the nations at the same stage of development as India. At the current rate of interest on fixed deposits with commercial banks, this amount can hardly fetch a monthly interest of Rs. 2,500.

The economic reforms pursued by the Government have very little for the common man. Even Bangladesh, once far behind, has surpassed India in GDP per capita. Bangladesh’s estimated 2020 GDP per capita at $1,888 places Bangladesh exactly one rung above India in the latest economic league tables of the International Monetary Fund. This is all the more a reason for the government to focus on the right kind of reforms that puts equal stress on social security for its citizens and economic growth.

According to a HelpAge India study, the government spends around 0.04 percent of the GDP on its flagship programme, Indira Gandhi National Social Assistance, ostensibly to ensure income security for the elderly. “The central government entitlement of Rs 200 and Rs 500 per month per person for those between 60 and 79 years and for those above 80 years respectively, declared in 2007, has come down in purchasing power value to a meagre Rs. 93 today,” a report by the NGO said in 2018. Even this assistance is not universal for all citizens in the age groups. Of India’s 29 states, 14 states provided a monthly pension of Rs 500 per person or less to the elderly, listed the State of Pensions in India Report, 2018.

Mizoram and Madhya Pradesh gave pensions as low as Rs 250 and Rs 300 per month per person. The highest monthly pension of Rs 2,000 per person was given by Delhi, Goa, Kerala and Andaman & Nicobar Islands. Said Mathew Cherian, chief executive, HelpAge India: “Of the 80 million elderly entitled to pension of Rs 200 per month, this meagre amount by the central government reaches just 22.3 million people… leaving out 58 million people with no pension or any other form of assistance.” Incidentally, the minimum pension for industrial workers above the age of 60 years is still Rs.1,000 per month. Before the 2014 Lok Sabha election, BJP had promised to raise the amount to Rs.2,000. Can a citizen survive on such a paltry pension? Incidentally, government servants get DA linked family pensions up to Rs 1,25,000 per month.


The government data shows that around 90 percent of Indian workers are informal. The share of contract labour in organised manufacturing reached 34 percent in 2011, up from 14 percent in 1996. Currently, the share may have surpassed the 50 percent mark.

An official estimate says India’s gig economy is expected to grow to $455 billion by 2024 at a compounded annual growth rate of 17 percent—with potential to grow at least double the pre-estimates for the post-COVID-19 pandemic period. The gig economy is a free market system in which temporary positions are common and organisations contract with independent employees for short-term engagements.

With the digital age fast expanding in the country, an estimated 56 percent of new employment in India is being generated by the gig companies across both the blue and white collar workforce. The system suits entrepreneurs as they save resources on such benefits as provident fund, pension, paid leave and, even, office space. The gig economy thrives largely as an unregulated employment system providing little job security and perks. Some gig companies may routinely invest in training employees. However, gig-economy workers mostly need to upgrade his or her skills at their own cost.

In India, Indonesia, Pakistan, Bangladesh and Nigeria — which account together for about a third of the world’s population — coverage of social insurance is single digit or almost so, with virtually no change detected over the past decades.

The 2019 World Development Report examined the ways to protect people and workers better in the new economy. Most people would be better-off with a social protection system that does not depend on their work situation. A means-tested guaranteed minimum income ending with a universal basic income is needed. India must define a core basket of social security benefits relying on a mix of its current programs.

However, in the absence of a universal social security system in India, the government must protect the most vulnerable section of the society, including the old and the handicapped. A full protection of individual bank deposits for senior citizens and total exemption of income-tax on interest on bank deposits for those above 70 are a must.

If necessary, the government may tap the rich to support a universal social security programme. This is possible. After all, India ranks high in the new annual dollar billionaires’ list. In 2020, the world added 607 new billionaires or more than three billionaires every two days, while India added 55 new billionaires or one billionaire every week, despite the pandemic, detailed the latest edition of Hurun Global Rich List 2021. It’s time that the government shows the will to start a reasonable universal social security programme to protect its citizens with special attention to the seniors.

(IPA Service)

Views expressed are personal

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