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| Small savings schemes make a comeback, reverse falling trend |
| BS Reporter / Mumbai Jun 12, 2009, 00:30 IST |
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Receipts rise after falling for two successive years.
Thanks to a flight to safety, small savings schemes have seen a reversal of the trend of falling inflows.
Instead, according to the provisional data released by the Reserve Bank of India today, in 2008-09 - after a two- year gap - the total receipts rose after falling for two successive years.
| THE RETURN OF SMALL SAVINGS |
| Year |
Receipts |
% change |
Outstanding |
% change |
| 2004-05 |
1,58,519 |
16.58 |
4,57,732 |
21.82 |
| 2005-06 |
1,73,283 |
9.31 |
5,27,611 |
15.27 |
| 2006-07 |
1,54,836 |
-10.65 |
5,64,372 |
6.98 |
| 2007-08. |
1,23,652 |
-20.14 |
5,09,411 |
-10.79 |
| 2008-09* |
1,43,668 |
16.19 |
5,44,340 |
6.86 |
Receipts and outstanding in Rs crore * Provisional data for 2008-09
Source: RBI Bulletin |
But of the over one dozen small savings schemes that come with assured returns of 8 per cent a year, it was the post office savings bank deposits, post office recurring deposits, the Monthly Income Scheme and Kisan Vikas Patras which saw an increase in mobilisation, while the others still continued to see falling inflows.
“It is a flight to safety for retail investors in light of the uncertainty in returns from market instruments such as mutual funds, Ulips and stocks,” said Rajendra Rautela, director, RR Financial, a distributor of financial products.
The flight to safety was also evident from the fact that since June 2008, when it became clear that the returns from investment in the stock markets would remain low, there was an increase in the mobilisation during every month of the last financial year, as compared to 2007-08.
With investors parking funds in small savings schemes due to the attractive returns, especially with many of them being tax free, has also prompted banks to seek a reduction in the administered interest rates offered on these schemes. Banks have even cited the returns offered by these schemes to argue their case against cutting interest rates despite signals from the monetary policy. After mop-ups of over Rs 50,000 crore each in December 2008 and January 2009, when banks were offering 10.5 per cent or more on certain deposits, mobilisation fell.
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.
In case of savings deposits of commercial banks, the increase was to the tune of 16.66 per cent with the total outstanding at the end of March 2009 estimated at Rs 9,00,967 crore, compared with Rs 7,72,282 crore at the end of 2007-08.
The other big contributor to the reversal in the small savings’ fortune was the Monthly Income Scheme which reversed the three-year falling trend with receipts rising almost 38 per cent to Rs 23,489 crore during 2008-09. In the previous year, receipts had dropped by 35.66 per cent.
But the trend of depleting outstanding balance under the Monthly Income Scheme could not be reversed withdrawals exceeded the receipts.
As a result, the outstanding amount fell by 1.71 per cent to Rs 1,79,270 crore at the end of March 2009, as against Rs 1,82,390 crore. Despite the drop, Monthly Income Scheme remained the largest contributor to the Rs 5,44,340 crore small savings corpus and accounted for 32.93 per cent share.
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