Context:
Recently, the government kept interest rates unchanged on Small Savings Schemes, including NSC (National Savings Certificate) and PPF (Public Provident Fund), for the second quarter of 2022-23 amid high inflation and rising interest rate.
- The interest rate on small savings schemes has not been revised since the first quarter of 2020-21.
Relevance:
GS III- Indian Economy
Dimensions of the Article:
- About Small Saving Schemes/Instruments
- What are the different saving schemes?
About Small Saving Schemes/Instruments
- They consist of 12 instruments and are the main source of household savings in India.
- Depositors receive a guaranteed interest rate on their funds.
- They are popular as they provide returns higher than bank fixed deposits, sovereign guarantee and tax benefits.
- The National Small Savings Fund receives payments from all small savings instruments (NSSF).
- Small savings have become a crucial source of funding the government deficit, particularly when the Covid-19 outbreak caused the deficit to inflate and further borrowing became necessary.
Determination of Rates:
- Interest rates on small savings schemes are reset on a quarterly basis, in line with the movement in benchmark government bonds of similar maturity. The rates are reviewed periodically by the Ministry of Finance.
- The Shyamala Gopinath panel (2010) constituted on the Small Saving Scheme had suggested a market-linked interest rate system for small savings schemes.
What are the different saving schemes?
Small savings instruments can be classified under three heads:
- Postal Deposits (comprising savings account, recurring deposits, time deposits of varying maturities and monthly income scheme).
- Savings Certificates: National Small Savings Certificate (NSC) and Kisan Vikas Patra (KVP).
- Social Security Schemes: Sukanya Samriddhi Scheme, Public Provident Fund (PPF) and Senior Citizens‘ Savings Scheme (SCSS).
-Source: Indian Express
