Small savings lose sheen in FY20 despite premium interest rates

Indicative of a possibility that people redeemed their savings for consumption after a likely loss in incomes

In what could signal a decline in individual incomes well before Covid-19 set its spikes in India, small savings by Indian households collapsed to near-zero in FY20, preliminary data released by Reserve Bank of India in its annual report shows. This data refers to the net of contribution to, and redemption from, small savings instruments. 

Savings in the form of “claims on government” dropped from being 1 per cent of the gross national disposable income (GNDI) in FY19 to zero in FY20, the data showed. At the same time, pension and provident funds, insurance funds and bank deposits saw an enhanced