Post office small savings collections up 700%

With fixed deposit rates in banks falling, the net collection of small savings through post offices increased a whopping 700 per cent till November 2015, year-on-year

Till November last year, the collection of small savings through post offices stood at Rs 21,041 crore, compared to Rs 2,360 crore till November 2014, according to data available at National Savings Institute.

Add to this the small savings collection by banks (in the forms of public provident fund (PPF), senior citizens' savings scheme and Sukanya Samridhi accounts), and the figure rises to Rs 49,051 crore. The PPF collection data of the previous year is unavailable, making it not possible to compare.

Banks are already pitching for parity in interest rates of small savings, as it is seen as a hindrance in smooth transmission of the impact of earlier interest rate cut by the Reserve Bank of India.

"There is a huge gap between the small savings and bank interest rate. It is long-pending demand of the banks that there should be some parity between the two,'' said Charan Singh, executive director, UCO Bank.

At present, bank fixed deposit earns between seven and 7.5 per cent interest rate on an average of a five-year tenure. In contrast, the interest rates on small savings hover between 8.4 per cent and 9.2 per cent across different schemes.

Gross post office small savings collection saw nearly a 40 per cent increase in collection between November 2014 and November 2015 to Rs 2,15,803 crore.

The government is also considering a reduction in interest rate on small savings. In December 2015, Union Finance Minister Arun Jaitley had said that the government will bring down interest rates on small savings "cautiously".

West Bengal remained the top state in terms of small savings collection, with total net collections a Rs 3,974 crore till November 2015, against Rs 1,381 crore till November 2014, showing a rise of 188 per cent. After West Bengal, Uttar Pradesh accounts for highest collections in small savings at Rs 3120 crore net collections till November 2015, an increase of 185 per cent in November 2014.

Earlier, in view of the dwindling small savings collections, the government had in April 2015 marginally revised rates on small savings interest rates. The interest rate on the Sukanya Samriddhi account was raised from 9.1 per cent to 9.2 per cent a year for 2015-16 and the interest rate on Senior Citizens Savings' Scheme was raised from 9.2 to 9.3 per cent for FY16. Those on other schemes were kept unchanged. Under Sukanya Samriddhi account, which was launched in January 2015, the total collections till November 2015 stood at nearly Rs 283 crore.