Sri Lanka to pay ‘interest subsidy’ to senior citizens as rates fall

Dec 28, 2009 (LBO) – Sri Lanka will give ’20 percent bonus’ interest for senior citizens as interest rates fell steeply over the past year on a scheme announced by the country’s president, a media report said. The Sunday Island newspaper said the Central Bank is preparing operating instructions for banks, which may be limit payments to a maximum of 90,000 rupees a year to become effective from January, based on a Treasury bill rate.

“We haven’t yet decided what the cap on payments will be but 90,000 rupees is the figure that is being looked at,” Central Bank governor Nivard Cabraal was quoted as saying in the newspaper.

“The Treasury Bill rate floor at which the scheme will kick off has also not yet been finally decided.”

The scheme had been announced by president Mahinda Rajapakas at a meeting of professional last week, to be effective from January 2010 for people above 60 years of age.

Sri Lanka’s interest rates have come down in recent months with inflation also falling ahead of interest rates.

In the past Sri Lanka’s state has effectively stolen from old saver in particular by generating high levels of inflation through central bank money printing.

Though interests