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Informist, Monday, Sept. 30, 2024

NEW DELHI – Net inflows into government-run small savings schemes fell 29.8% to INR 1.152 trillion in Apr-Aug due to a high base. The government's small savings collections were at a record high of INR 4.217 trillion in 2023-24 (Apr-Mar). 

At INR 1.152 trillion, the collections in Apr-Aug accounted for 29.7% of the Budget estimate of INR 3.882 trillion for FY25. In the same period last year, the mop-up accounted for 37.6% of the previous fiscal's revised estimate, and 39% of the actual collection. 

There was a robust inflow into the small savings schemes in FY24 on account of hikes in interest rates on most of schemes, launch of a new scheme, and tweaks to the Senior Citizen Savings Scheme. 

The government had raised interest rates on small savings schemes by 60-160 basis points between September 2022 and December 2023. Currently, some small savings schemes offer an interest rate as high as 8.2%, against the weighted average domestic term deposit rate of 7.03% for public sector banks. 

The Budget for FY24 had announced a new small savings scheme Mahila Samman Savings Certificate for women available till March 2025. The plan involves a deposit of up to INR 200,000 for a period of two years at a fixed interest rate of 7.5% with an option for withdrawal even before maturity. The government had also raised the maximum deposit limit for Senior Citizen Savings Scheme to INR 3.0 million from INR 1.5 million. The rate of interest on this scheme is the highest, at 8.2%.

The government has not revised the interest rates on small savings schemes so far in the current year. It is likely to announce the interest rates for Oct-Dec later on Monday.  

Small savings collections are crucial since they account for about 25% of the total government borrowing to finance the fiscal deficit. In Apr-Aug, the government borrowed INR 737.64 billion from National Small Savings Funds, up 15.2% on year. The Budget for this fiscal has estimated borrowing of INR 4.201 trillion from the funds.  End 

Reported by Krity Ambey

Edited by Akul Nishant Akhoury

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