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Collections under small savings schemes have seen a pickup in April-September, with deposits for the Senior Citizens Savings Scheme surging over 2.5 times year-on-year to Rs 74,675 crore. This marks a 160 per cent increase over Rs 28,715 crore collected in the corresponding period a year ago, a senior government official said. Additionally, collections under Mahila Samman Savings Certificate, which was introduced in Budget this year, stood at Rs 13,512 crore during April-September.
The interest rate for Senior Citizens Savings Scheme was hiked to 8.2 per cent from 8 per cent in April-June this year and has been kept unchanged since then. The investment limit for the scheme for elderly was raised to Rs 30 lakh from Rs 15 lakh from April this year. Other small savings rates were broadly kept unchanged for October-December quarter, with an increase of 20 basis points in interest rate of one small savings scheme — 5-year recurring deposit.
The interest rate for the Public Provident Fund scheme has remained unchanged at 7.1 per cent, which the official said has been kept in mind factoring in the tax benefits for the scheme.
“There is a conscious thought towards it (keeping PPF rate unchanged). The Shyamala Gopinath Committee in 2016 had given a formula for the small savings schemes rates…what the committee missed out was possibly the tax benefits given to schemes like PPF. Our priority is for schemes for senior citizens and women like Sukanya Samriddhi Account Scheme. PPF still remains the scheme with one of the highest returns. But we have to factor in the costs when we pay interest as there is revenue loss on the receipts side also due to tax benefits,” the official said.
There has been no change in PPF interest rate since April 2020, when it was cut to 7.1 per cent from 7.9 per cent. For April-June 2021, the government had further proposed to cut it to 6.4 per cent from 7.1 per cent. The decision was, however, withdrawn a day later.
Small savings schemes play a crucial role in government finances as Centre and some states borrow against the National Small Savings Fund. For FY24, the government has said it will use Rs 4.71 lakh crore from NSSF collections to finance a part of its overall fiscal deficit.
Despite the pickup in small savings collections, the government has stuck to its FY24 borrowing plan. In September, the government announced it would borrow Rs 6.55 lakh crore during October-December, which is 42.45 per cent of the total Rs 15.43 lakh crore gross borrowings budgeted for the whole financial year.
