INSS payroll: government will discuss interest again – 03/17/2023 – Market

The government of Luiz Inácio Lula da Silva (PT) will discuss again this Tuesday (21) the reduction of the interest rate ceiling on payroll loans from the INSS (National Institute of Social Security). The cut led to the suspension of this type of loan by the largest public and private banks in the country.

The meeting, suggested by the Ministry of Finance, will also include the participation of the Civil House, Social Security and Labor portfolios. The objective is to discuss the decision of the CNPS (National Social Security Council) last Monday (13), which cut the payroll ceiling from 2.14% to 1.70% per month.

The announcement led large private banks, such as Bradesco and Itaú, and even the public ones Caixa Econômica Federal and Banco do Brasil –which have 11% of the payroll market for retirees–, to interrupt the concessions.

The financial institutions argue that they are carrying out technical studies of economic viability and that the availability of the credit line is subject to the conclusion of the analyses.

Representatives of the financial sector expect that, after the meeting of ministers, other actors will be included in the discussion and that a “brake for tidying up” will be implemented.

The idea is to seek an understanding to reach a lower rate, but which preserves the economic viability of the product. While the negotiations last, the institutions defend the suspension of the resolution approved by the Social Security Council, which would make it possible to resume the offer of credit based on the previous ceiling.

Estimates made by the financial sector show that, by offering payroll loans to retirees and pensioners at an interest rate of 1.70% per month, banks would have a negative return of 0.23% on operations.

This means that the institutions would suffer losses with the modality, which is not allowed, according to the resolution of the CMN (National Monetary Council) which says that “the contracting institution must implement a systematic monitoring and control of the economic viability of the operation”.

The cut in the INSS payroll loan interest ceiling was approved by 12 of the 15 participants of the National Social Security Council – the three employer representatives were the only votes against the measure.

In the note sent to the CNPS to support the proposal to reduce interest, the Social Security cites a survey of interest rates on payroll loans to INSS beneficiaries made in the period from February 15 to 23.

Calculations made pointed to an arithmetic average of 1.94% per month this week, without considering the weight of each financial institution in the total of this type of credit. “In this way, it can be argued that the reduction of the ceiling should not have an important impact for institutions whose average rate of operations is already below this ceiling”, stated the text.

In the week mentioned in the note, only three banks offered a rate lower than the new ceiling of 1.70% per month – the list compiled by the BC has 39 in all.

The study also cites the difference in rates between the lines aimed at retirees and pensioners and those offered to public servants. “It appears that, strangely, these institutions practice rates on payroll loans for public servants lower than those on payroll loans for INSS beneficiaries”, indicates the note.

“Both clienteles have income stability, that is, the creditor is sure that he will receive his credit, but the rates are significantly different.”

The study uses the variation of the INPC (National Consumer Price Index) as a reference for assessing interest on payroll loans – an indicator that measures price variations for the consumer basket of the salaried population with lower incomes.

Members of the financial sector, however, contest the use of this inflation index to calculate the funding cost of banks. The future interest curve and basic rate (Selic, currently set at 13.75% per year) are the parameters adopted by the segment.

Workers’ representatives on the council defend the decision to lower the rate cap. “I’m not seeing pressure for the council to review the cut. The council’s decision is sovereign. The next meeting is at the end of April, but I believe there is no reason to talk about interest, neither to lower nor to increase”, says Odair Antonio Bortoloso, representative of Força Sindical.

Ariovaldo de Camargo, from CUT (Central Única dos Trabalhadores), argues that the threat of suspension of financing by financial institutions should be discussed.

“If the banks really want to bring this debate to light, they need to present numbers that take into account what is the remuneration of bank correspondents, who keep part of what is the volume of the interest rate”, he says. “There is no need for us to discuss again through the blackmail that the banks are doing.”

Evandro José Morello, from Contag (National Confederation of Rural Workers, Farmers and Family Farmers), did not rule out returning to the negotiating table to address the issue. “The lack of credit for this audience is a concern,” he said. “That’s a little bit of what we’re wanting to dialogue with the financial system to find a good middle ground and settle the situation.”