NAGPUR: State Bank of India's (SBI) move to cut interest rates for bulk deposits by 125 to 190 basis, following demonetization, has led to a rush of investments in Life Insurance Corporation's (LIC) pension plan — Jeevan Akshay 6, which has an average return 7.5%. There was a sharp rise in the investments from November 17, a day after SBI announced the rate cut. As the investment grew and with the interest rate scenario ahead not looking good, the PSU insurer decided to terminate the scheme from Wednesday. "A revised plan with lower rates will be launched in the coming days," said a source in LIC. There are reports that funds are being diverted to the pension plan from bank deposits. The returns in Jeevan Akshay depend on the person's age — older the insured, higher is the interest. A revision at this juncture was unexpected. But as the interest rates are down, even LIC may not be able to generate the current returns on the Jeevan Akshay scheme. "The number of investors too has gone beyond the manageable limits," said a source in LIC engaged selling the plan. The Nagpur division, which covers entire Vidarbha, has netted Rs 40 crore from November 17 to 29. "The data for November 30 is yet to be compiled," said the source. The entire year's collection for the year till now is Rs 187 crore in the division. As against this, Nagpur division got Rs 70 crore for the entire last fiscal. The major jump in sales came in the last fortnight after SBI announced the rate cut. "The same trend can be observed across the country," said the source. Even as rates for only bulk deposits have been reduced, there is a general perception that entire bank deposit rates are going down. "This has led to funds being diverted to the pension plan where the rates are higher," said the LIC source. Most of the sales is expected to be without the efforts of agents as the scheme hardly provides any incentive to them, according to the source. Yet, some agents were hard-selling the plan comparing its returns with those on bulk deposits. "Some of my clients took funds from their fixed deposits and parked it in the Jeevan Akshay plan. This is because a long-term plan is preferred as against fixed deposits on which the rates may come down," said Bharat Parekh, the country's biggest agent. Ranjeet Dani a financial adviser said even as the plan assures a long-term pension, it is also being sold by hiding the entire facts "like the rates depend on the age". "Certain key aspects like the income is taxable is also not being disclosed by the agents," he said.
