This, it is argued, brings more capital in the market and stimulates demands for goods and services.
Also, it is argued that the reduced rates enable banks to borrow at lower rates from central bank and then pass on this benefit to retail customers in terms of loans at reduced rates. Cheaper loans motivates public to buy more and more of consumer products and services, thereby helping Indian economy grow.
FALLACY
However, all these arguments are a fallacy due to psychological and economic reasons.
Psychologically speaking, reduced savings Bank rates creates a fear psychosis in minds of retail consumer who starts thinking that they will not have enough earnings/returns on their savings in future to fall back upon in times of need.
Consequently, the retail consumer starts buying less and less in order to keep and maintain adequate funds for any future contingency. This creates reduced demand in market and triggers a chain reaction, thereby slowing down whole economy.
But, when savings rates are higher, then it psychologically creates a sense of economic security in mind of a retail consumer.
Increased savings Bank rates creates a Secure psychosis in minds of retail customer who starts thinking that they will have enough earnings/returns on their savings in future to fall back upon in times of need.
Consequently, the retail consumer starts buying more and more with reassuring knowledge that they will have adequate funds for any future contingency due to enhanced savings rates offered by banks. This creates increased demand in market and triggers a chain reaction, thereby moving forward the wheels of whole economy.
Then, who actually benefits due to savings bank rate cuts?
Well, as everyone knows, it’s big business houses, industrialists, business persons who benefit more than the retail consumer. They get huge cheap loans from banks. And there is no guarantee that they will use these cheap funds to foster economic development and growth of the country.
~ डॉ स्वामी अप्रतिमानंदा जी
Dr Swaamee Aprtemaanandaa Jee
(The writer is an acclaimed independent Scientific Healer, yoga and ayurveda-Practitioner, Spiritual/Research/Political/Cosmic Scientist, Analyst, Gynaecologist, Epidemiologist, Geostrategist, economic/political-Geographer, Geohumanist, Cosmologist, innovator and citizen-Economist)
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