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Informist, Monday, Dec. 2, 2024

 

NEW DELHI – Net inflows into government-run small savings schemes fell 30.5% to INR 1.451 trillion in Apr-Oct on account of a high base. Inflows during the same period in the previous fiscal year were at INR 2.090 trillion. In 2023-24 (Apr-Mar), the government's small savings collections were at a record high of INR 4.217 trillion. 

 

At INR 1.451 trillion, the collections in Apr-Oct accounted for 37.4% of the Budget estimate of INR 3.882 trillion for FY25. In the same period last year, the mop-up accounted for 47.8% of the revised estimate of FY24, and 49.6% of the actual collection. 

 

Inflows into small savings schemes were robust in FY24 on account of hikes in interest rates on most of the schemes, the launch of a new scheme, and tweaks to the Senior Citizen Savings Scheme. The collections target for FY25 is 11.1% lower than that of last year and 7.9% lower than the final collections.

 

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 6.9% for public sector banks. 

 

In the Budget for FY24, the government had announced a new small savings scheme, Mahila Samman Savings Certificate for women, which will be 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 the 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 Jan-Mar on Dec. 31.

 

Small savings collections are crucial since they account for about 25% of the total government borrowing to finance the fiscal deficit. In Apr-Oct, the government borrowed INR 1.219 trillion from National Small Savings Funds, down 27.3% on year. The Budget for FY25 has estimated borrowing of INR 4.201 trillion from the funds.  End 

 

 

Reported by Krity Ambey

Edited by Tanima Banerjee

 

 

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