Though the fall in household savings, especially those in financial products, was expected to result in lower bank and other savings, small savings (PPF and postal savings) have not only contracted, they were negative in Q1 FY13. Net small savings collections were minus R1,920 crore in Q1 FY13 though gross collections were R51,600 crore. Small savings fell in FY12 also, and net collections were just R650 crore against R58,650 crore in FY11. The amount set aside in savings deposits of banks has been increasing; the outstanding amount at the end of August was R15,57,800 crore, higher than the R14,44,200 crore at the end of March.
Experts believe that one of the key reasons for the sharp fall in small savings is the withdrawal of the Kisan Vikas Patra (KVP), a popular product since there are no questions asked about the source of money. The introduction of the KYC norms may also have prompted individuals to park their surpluses elsewhere, for example in real estate or gold. In Jan-June 2012, household gold purchases were lower by 11% y-o-y but the value of property bought was higher by 37% y-o-y.
