Interest rates for NSSF loan to Centre, states cut to 8.8%

The government has slashed interest rates on loans from the National Small Savings Fund (NSSF) to 8.8 per cent from 9.5 per cent for FY17. The loans are given to the Centre as well as states. The move is in sync with the reduction in interest on small savings schemes with effect from April 1 this year and is expected to provide relief to the government on interest rates.

All the funds collected from small savings such as National Small Savings Certificate, Kisan Vikas Patra (KVP), Public Provident Fund (PPF) and Senior Citizens’ Savings Scheme (SCSS) is deposited in the NSSF. Similarly, the depositors get money from NSSF on redemption. The balance is given to the Union and state governments as loans.

“In the context of easing the transmission of the lower interest rates in the economy, the government has taken a comprehensive view on the social goals of certain National Small Savings Schemes,” the finance ministry stated.

In March, the government had slashed interest rates on all small savings schemes for the first quarter of FY17. The interest rate on PPF was cut to 8.1 per cent from 8.7 per cent; interest rate on KVP to 7.8 per cent from 8.7 per cent; and SCSS to 8.6 per cent from 9.3 per cent.

NSSF is administered by the Department of Economic Affairs under National Small Savings Fund (Custody and Investment) Rules, 2001. The fund’s objective is to delink 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 they constitute a part of the outstanding liabilities of the Centre. The NSSF flows affect the cash position of the Centre.