Dear Comrades,
NAGPUR: The government does not appear keen on investments into postal
small savings schemes. For the first time, no target has been set for
net collections into these schemes that include public provident fund
(PPF) and national savings certificates available through post office
counters as well as nationalized banks. The schemes are managed through
National Saving Institute headquartered in Nagpur.
The mop-up which finally becomes part of national small savings fund (NSSF), is categorized into gross and net collections. The latter includes what remains for the given financial year after outgoes on maturity are deducted. Last year, a target of Rs 30,000 crore was set for net collections which could not be attained due to outflows exceeding inflows. The gross collection in the previous year was Rs 2,18,000 crore, more than the target by a couple of thousand crores.
Considering the dismal performance, it was decided not to have any specific target for net collections this year, said a source. However, this is not the only reason. Higher investment into these schemes will only increase government's interest burden. Higher outgo is now preferable, said sources in ministry of finance.
The funds from investors go to NSSF from which state governments are provided long-term loans at around 9%. However, since last five to six years states are not much interested in NSSF loans as cheaper funds are available through open market. Returns on loans generate funds to pay interest to investors in small savings schemes. Over the years, the shortfall in NSSF's income due to lack of interest by state governments is being borne by the Centre, which has to shell out around Rs 16,000 crore per year, said a source.
The burden is only increasing for the government and it wants fresh investment into the schemes to remain at minimum. Even the target for gross collections is lower by Rs 2,000 crore of actual collection of Rs 2,18,000 crore last year. As of May 2012, gross collections in the schemes stood at Rs 30,552 crore as against over Rs 32,200 crore being taken out. The collection is already 84% of the target but with no specific target for net collections, there will be a little effort for re-deployment of funds or taking gross collections to such a level that the outflow does not surpass inflows, the source said.
The interest on some schemes has been also increased from April 2012 and that too has resulted in beefing up collections. Rates in savings and time deposits have been increased from 0.30% to 05% at a maximum of 8.50% for five years. NSC rates have been increased by 0.20% and public provident fund by 0.20%. Rates on bank fixed deposits are on the higher side at 9% for long term but, unlike PPF, those are taxable.
Times of India
The mop-up which finally becomes part of national small savings fund (NSSF), is categorized into gross and net collections. The latter includes what remains for the given financial year after outgoes on maturity are deducted. Last year, a target of Rs 30,000 crore was set for net collections which could not be attained due to outflows exceeding inflows. The gross collection in the previous year was Rs 2,18,000 crore, more than the target by a couple of thousand crores.
Considering the dismal performance, it was decided not to have any specific target for net collections this year, said a source. However, this is not the only reason. Higher investment into these schemes will only increase government's interest burden. Higher outgo is now preferable, said sources in ministry of finance.
The funds from investors go to NSSF from which state governments are provided long-term loans at around 9%. However, since last five to six years states are not much interested in NSSF loans as cheaper funds are available through open market. Returns on loans generate funds to pay interest to investors in small savings schemes. Over the years, the shortfall in NSSF's income due to lack of interest by state governments is being borne by the Centre, which has to shell out around Rs 16,000 crore per year, said a source.
The burden is only increasing for the government and it wants fresh investment into the schemes to remain at minimum. Even the target for gross collections is lower by Rs 2,000 crore of actual collection of Rs 2,18,000 crore last year. As of May 2012, gross collections in the schemes stood at Rs 30,552 crore as against over Rs 32,200 crore being taken out. The collection is already 84% of the target but with no specific target for net collections, there will be a little effort for re-deployment of funds or taking gross collections to such a level that the outflow does not surpass inflows, the source said.
The interest on some schemes has been also increased from April 2012 and that too has resulted in beefing up collections. Rates in savings and time deposits have been increased from 0.30% to 05% at a maximum of 8.50% for five years. NSC rates have been increased by 0.20% and public provident fund by 0.20%. Rates on bank fixed deposits are on the higher side at 9% for long term but, unlike PPF, those are taxable.
Times of India
