Small Saving schemes have been always an important source of household savings in India. Small savings instruments can be classified under three heads.
These are:
?? Postal deposits [comprising savings account, recurring deposits, time deposits of varying maturities and monthly income scheme(MIS)]
?? Savings certificates [(National Small Savings Certificate VIII (NSC) and Kisan Vikas Patra (KVP)]
?? Social security schemes [(public provident fund (PPF) and Senior Citizens‘ Savings Scheme(SCSS)].
A “National Small Savings Fund” (NSSF) in the Public Account of India has been established with effect from 1.4.1999. A new sub sector has been introduced called “National Small Savings Fund” in the list of Major and Minor Heads of Government Accounts. All small savings collections are credited to this Fund. Similarly, all withdrawals under small savings schemes by the depositors are made out of the accumulations in this Fund. The balance in the Fund is invested in Central and State Government Securities. The investment pattern is as per norms decided from time to time by the Government of India.
The Fund is administered by the Government of India, Ministry of Finance (Department of Economic Affairs) under National Small Savings Fund (Custody and Investment)
The objective of NSSF is to de-link small savings transactions from the Consolidated Fund of India and ensure their operation in a transparent and self-sustaining manner. Since NSSF operates in the public account, its transactions do not impact the fiscal deficit of the Centre directly. As an instrument in the public account, the balances under NSSF are direct liabilities and constitute a part of the outstanding liabilities of the Centre. The NSSF flows affect the cash position of the Central Government
The Sukanya Samriddhi Yojana, the Senior Citizen Savings Scheme and the Monthly Income Scheme are savings schemes based on laudable social development or social security goals. Hence, the interest rate and spread that these schemes enjoy over the G-sec rate of comparable maturity viz., of 75 bps, 100 bps and 25 bps respectively have been left untouched by the Government.
Similarly the spread of 25 bps that long term instruments, such as the 5 yr Term Deposit, 5 year National Saving Certificates and Public Provident Fund (PPF) currently enjoy over G-Sec of comparable maturity, have been left untouched as these schemes are particularly relevant to the self-employed professional and salaried classes. This will encourage long term savings.
The 25 bps spread that 1 yr., 2yr. and 3 yr. term deposits, KVPs and 5 yr Recurring Deposits have over comparable tenure Government securities, shall stand removed w.e.f. April 1, 2016 to make them closer in interest rates to the similar instruments of the banking sector. This is expected to help the economy move to a lower overall interest rate regime eventually and thereby help all, particularly low-income and salaried classes.
The compounding of interest which is biannual in the case of 10 yr National Saving Certificate (discontinued since 20.12.2015), 5 yr National Saving Certificate and Kisan Vikas Patra, shall be done on an annual basis from 1.4.16.
Premature closure of PPF accounts shall be permitted in genuine cases, such as cases of serious ailment, higher education of children etc,. This shall be permitted with a penalty of 1% reduction in interest payable on the whole deposit and only for the accounts having completed five years from the date of opening.
The FY18 disbursements included:
Rs 25,000 crore to FCI.
Rs 20,000 crore to NHAI.
Rs 3,000 crore to Air India.
Rs 58,684 crore to ‘others’
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