In the sharp media focus on stocks, FDs and gold, small savings schemes have been largely ignored by the public. But they must form a part of portfolio of every investor who is looking to save tax by investing small amounts.
The high safety levels coupled with the attractive returns make small savings schemes a 'must-have' proposition for most investors.
The receipts have risen after falling for two successive years. Within the gainers among the small savings schemes, the maximum increase was seen in the case of post bank deposits, which had bucked the trend in earlier years as well. During 2008-09, the total receipts were estimated to have increased by 21.65 per cent to Rs 52,513 crore, as against Rs 43,165 crore. The outstanding under the scheme rose 12.27 per cent to Rs 22,217 crore.
'The government's decision to keep interest rates unchanged on small savings schemes will certainly constrain banks' ability to cut deposit rates further.'
The government on Friday raised interest rates on most post office saving schemes by up to 0.7 per cent for the April-June 2023 quarter in line with the firming of interest rates in the economy. While the interest rates for popular PPF and savings deposits have been retained at 7.1 per cent and 4 per cent, respectively, there has been an increase between 0.1 per cent and 0.7 per cent in other saving schemes, a finance ministry statement said. The highest increase was in the interest rate of the National Savings Certificate (NSC), which will now attract 7.7 per cent, up from 7 per cent, for the April 1 to June 30, 2023 period.
Investors should invest in small saving schemes at present levels; these investments will fetch them attractive rates and be insulated against future changes.
For longer tenure products, they offer higher returns compared to other instruments. But for shorter tenures, things are getting tighter for investors.
SBI has twice hiked interest rates on fixed deposits within a month, but an investor still gets better returns at the post office.
The interest rate on these schemes have remained unchanged for over a year now.
The next revision will make the rates similar to those of bank FDs.
RBI has also announced new guidelines to price loans from April 1.
These schemes now cease to be lucrative in spite of a raise in most of their returns. Reason: These schemes are now linked to the market.
National Small Savings Fund schemes are losing out to stock market, bank and insurance products.
>According to the latest RBI data, PPF receipts have already experienced a decline between April 2023 and February 2024. Other schemes like the Sukanya Samriddhi Account and National Savings Certificate are also witnessing reduced inflows.
Even if interest rates go down, they may continue to offer better returns than fixed deposits.
Post office savings of 1, 2 and 3 year term deposits and 5-year recurring deposit currently fetch 8.4 per cent interest per annum.
The deposit facility for the women and girls will be for a period of two years with a rate of interest of 7.5 per cent, Sitharaman announced.
NSSF collections are down by 68% over last year. Investors are preferring banks, mutual funds and insurance policies for investments over the National Small Savings Fund. In order to deploy the surplus, the NSSF plans to lend Rs 1,500 crore to India Infrastructure Finance Company Ltd at 9 per cent interest. To save the fund from collapsing, the finance ministry included 5-year Post Office Time Deposits and Senior Citizens' Saving Scheme under Section 80C for tax exemption.
The Indian government has maintained the interest rates on small savings schemes, including PPF and NSC, for the eighth consecutive quarter, starting April 1, 2026.
'Whether you will bring this down and cause hurt to senior citizens, who are probably living on that little interest rate that they earn out of it... But equally, if I just look at the kitty of the National Small Savings Fund, it is from that same kitty that I'm borrowing.'
Centre took Rs 1,002 bn from here in 2017-18, sharply up from Rs 904 bn a year before and Rs 123.6 bn in FY14
Since April 2016, interest rates of all small saving schemes have been recalibrated on a quarterly basis.
The rates of interest on various small savings schemes for the third quarter of financial year 2018-19, starting October 1 and ending on December 31, 2018, has been revised, the finance ministry said while notifying the rates.
Equity-oriented mutual fund schemes in India experienced a 5 per cent decline in net inflows in April, reaching Rs 38,440 crore, while monthly Systematic Investment Plan (SIP) contributions also saw a decrease.
The government hopes the latest action will lead to banks also lowering the cost of borrowing for corporate and individual borrowers.
The tax benefits on SCSS and the restored maturity bonus on POMIS will make the investments more attractive.
Interest rate on Public Provident Fund scheme was cut to 8.1%.
Rationalisation in the rates offered by small savings schemes is a must.
The FM also proposed that the maximum deposit limit for Monthly Income Account Scheme will be enhanced from Rs 4.5 lakh to Rs 9 lakh for a single account and from Rs 9 lakh to Rs 15 lakh for a joint account.
For the purpose of our discussion, we have chosen schemes which offer tax benefits at the time of making investment under Section 80C, i.e. Public Provident Fund & National Savings Certificate.
Sebi is working with other regulators to expand the CAS framework.
Prime Minister Narendra Modi has accused the Mamata Banerjee government of favouring infiltrators over the native population, asserting that the upcoming assembly election in West Bengal is a battle to save the state's identity.
Prime Minister Narendra Modi has accused the Mamata Banerjee government of favouring infiltrators over the native population in West Bengal, asserting that the upcoming assembly election is a battle to save the state's identity.
Demonetisation is the biggest reason for the rise in preference for small savings.
'Decide on an asset allocation you are comfortable with and stick to it for the long term.'
Here is a profile of some of the popular small savings schemes.
Official sources said the government was of the view that while de-regulating, the rates on small savings' interest rates could either be cut 25 to 50 basis points or linked to the sovereign rate, which is the interest rate on government securities for a specific maturity. The move follows demands from banks and suggestions from RBI.
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