Letter to BS: Govt savings schemes require total overhaul, rationalisation

The latest data released by the Reserve Bank of India (RBI) show a sharp decline in small savings in the first eight months of the financial year 2017-18 when small savings schemes amounted to just Rs 40,429 crore, a seven-fold dip from Rs 2,75,682 crore in the corresponding period of the previous year. Evidently, it is at the cost of more investment in mutual fund schemes where political and other factors can suddenly harm investors like it happened with investment in properties.

A sharp decline in the interest rate was anticipated after demonetisation when the Jeevan Akshay pension plan of LIC of India witnessed maximum investments. But with currency circulation crossing what it was before demonetisation, government savings schemes require total overhaul, rationalisation and simplification.

An exclusive long-term government savings scheme to be available in all branches of public sector banks and post offices should be introduced with an annual interest rate of 8 per cent where interest may be auto-credited for senior citizens on a monthly basis. For others, auto-credit of interest may be done on an annual basis. Deposits under this scheme should be exempted under section 80-C of the Income Tax Act. Other savings schemes and pension plans can then be discontinued. Special savings schemes such as the Public Provident Fund should also attract 8 per cent annual interest rate.

Subhash Chandra Agrawal New Delhi

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