Govt expects to net Rs 1,100 cr from small savings in FY13

There had a been a sharp decline in the investments into small savings like Public Provident Fund and Monthly Income Scheme last fiscal

The government is expecting a net inflow of Rs 1,100 crore in the current fiscal from small savings schemes like PPF and MIS which became more attractive after the Centre's decision to hike interest rates on them.

"The government is expecting Rs 1,100 crore inflow in the NSSF (National Small Savings Fund) in the current fiscal," a senior Finance Ministry official told PTI.

In order to arrest outflow of investments on small savings schemes, the government had decided to increase interest rates on them by up to 0.5% with effect from April 1, 2012.

There had a been a sharp decline in the investments into small savings like Public Provident Fund (PPF) and Monthly Income Scheme (MIS) last fiscal and it is estimated that there has been a outflow to the tune of Rs 12,000 crore from the NSSF.

For the current fiscal, the government has raised the interest rate on PPF to 8.8% from 8.6%, while MIS gives a return of 8.5% as against 8.2% earlier.

Post office term deposits of one and two years earn 8.2% and 8.3% interest, respectively, an increase of 0.50% over last fiscal.

The government had in January linked the interest rates on small savings at par with other securities in the market and also raised the investment limit into PPF to Rs 1 lakh from Rs 70,000 earlier to attract more funds into the NSSF.

The decline in the inflow into NSSF last fiscal had necessitate the government to go for additional borrowing to the tune of Rs 92,000 crore.

With the increase in the interest rates for small savings, the government expects a decent inflow into NSSF, the official said, adding that "there is no need for additional borrowing in the current fiscal".

For the current fiscal the government has budgeted a gross borrowing of Rs 5.13 lakh crore, as against Rs 5.1 lakh crore last fiscal.

As per the new rates notified for current fiscal, the National Savings Certificates (NSC) having maturity of five and 10 years attract 8.6% and 8.9% interest, respectively, up 0.2% each.

The interest rate on post office savings deposit now stands at 4%.

Interest rate for three-year term deposits has been raised to 8.4% from 8%. Similarly, interest rate on five-year deposit has been raised from 8.3% to 8.5%.

The five-year recurring deposits will fetch an interest of 8.4%, against 8% at present.

The rate for senior citizens savings scheme (SCSS) has been hiked to 9.3% from 9%.