With banks offering higher rates on deposits, the government?s net small savings receipt slipped into the red during April-June as redemptions exceeded gross collections by R1,920 crore, minister of state for finance Namo Narain Meena informed Parliament on Thursday.
The gross collections were at R516.70 crore during the first quarter.
?While the saving deposits with banks have a positive growth, there has been a decline in gross and net small savings collections,? Meena said in a written reply to Rajya Sabha.
During 2011-12, gross small savings collections have declined sharply by 20% to R2.19 lakh crore while net collection slid by 99% to R650 crore as redemptions were heavy and fresh collection were subdued because investors switched bank deposits offering higher returns. Net collections were down 8.9% to R58,650 crore during 2010-11.
In contrast to small savings, the savings bank deposits grew by 12.35% to R14.44 lakh crore last fiscal year and was up 13% in the previous year as Reserve Bank of India deregulated the rates and allowed banks to offer higher rates.
Last year?s decline in small savings forced government to increase market borrowing by R40,000 crore and align the rates with yields of government securities with similar maturities with a spread of 25 basis points for most schemes.
The spread on a new 10-year National Savings Certificate was pegged at 50 bps and on Senior Citizens Savings Scheme at 100 bps over G-sec yields.
The government also rate of interest on Post Office Savings Account (POSA) has been increased from 3.5% to 4% while the ceiling of R1 lakh in single account and R 2 lakh in joint account was removed. The annual ceiling on investment under Public Provident Fund (PPF) Scheme has been increased from R70,000 to R1 lakh.
