30-August-2012 16:44 IST

Measures to Check Fall in Saving Deposits

The details of saving deposits with Banks and Gross and Net Small Savings Collections during 2009-10, 2010-11, 2011-12 and during the current year are given below:-

(Rs. In Billion)

           While the saving deposits with banks have a positive growth, there has been a decline in gross and net small savings collections.

            The Government, inter alia, has taken the following decisions with regard to interest rates and other measures for making small saving schemes attractive:-

1.      The rate of interest on small savings schemes has been aligned with G-Sec rates of similar maturity, with a spread of 25 basis points (bps) with two exceptions.  The spread on 10 year NSC (new Instrument) will be 50 bps and on Senior Citizens Savings Scheme 100 bps.

2.      The rate of interest on Post Office Savings Account (POSA) has been increased from 3.5 % to 4%.   The ceiling of maximum balance in POSA (Rs. 1 lakh in single account and Rs. 2 lakh in joint account) has been removed.

3.      The maturity period for Monthly Income Scheme (MIS) and National Savings Certificate (NSC) has been reduced from 6 years to 5 years.

4.      A new NSC instrument, with maturity period of 10 years, is being introduced.

5.      The annual ceiling on investment under Public Provident Fund (PPF) Scheme has been increased from Rs. 70,000 to Rs. 1 lakh.

6.      Liquidity of Post Office Time Deposit (POTD)-1,2,3 & 5 years – has been improved by allowing pre-mature withdrawal at a rate of interest 1% less than the time deposits of comparable maturity.  For pre-mature withdrawals between 6-12 months of investment, Post Office Savings Account (POSA) rate of interest will be paid.

The Reserve Bank of India has also deregulated the savings bank deposit interest rate effective October 25, 2011.  Banks are now free to determine their savings bank deposit interest rate, subject to the following two conditions: First, each bank will have to offer a uniform interest rate on savings bank balances up to Rs. 1 lakh, irrespective of the amount in the account within this limit.  Second, for savings bank balances over Rs. 1 lakh a bank may provide differential rates of interest, if it so chooses.

 This was stated by the Minister of State for Finance, Shri   Namo Narain   Meena in written reply to a question in the  Rajya  Sabha today.

 

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DSM/RS/bs

 

Small savings rate alignment with government securities restores attractiveness of retail savings through targeted rate and liquidity changes. The Government aligned small savings interest rates with comparable government securities, maintaining a spread with higher specified spreads for the new ten year NSC and the Senior Citizens Savings Scheme; increased Post Office Savings Account interest and removed its balance ceilings; shortened MIS and NSC maturities and introduced a new ten year NSC; raised the Public Provident Fund annual investment ceiling; liberalised premature withdrawal rules for Post Office Time Deposits; and the Reserve Bank deregulated savings bank deposit rates subject to a uniform rate up to a specified threshold and optional differential rates above it.