Small savings scheme interest rate: Big news! See what official said
Small savings scheme interest rate: Department of Economic Affairs Secretary Atanu Chakraborty has hinted at revision in small savings rate next quarter, in line with market rate, a development that could lead to speedier transmission of monetary policy rate. During the current quarter, the government refrained from cutting interest rates on small savings schemes, including Public Provident Fund (PPF) and National Savings Certificate (NSC), despite moderating bank deposit rates.
Nevertheless, he said that the rate of small savings should have some linkages to market rate, which is largely determined by the G-sec rates.
Stating that the Shyamala Gopinath Committee report has been accepted, but operation of the linkage was still in works, he said "wait for this quarter interest rates. That will give you a fairly good indication." (Photo: Reuters)
Currently, there is difference of nearly 100 basis point between deposit rate of banks and small savings rate for one year maturity.
He further said that although the government is not dependent on small savings schemes, there is no plan to do away with the scheme as people use those instruments. (Photo: Pixabay)
Asked if the government would resort to additional mop up to fund its increased fiscal deficit target, Chakraborty said there will be no extra market borrowing this year and there was no question of monetisation of deficit.
The government has raised fiscal deficit target in the Union Budget to 3.8 per cent of the GDP from 3.3 per cent pegged earlier for 2019-20 due to revenue shortage. (Photo: PTI)
The government resorted to 'escape clause' under the Fiscal Responsibility and Budget Management (FRBM) Act which provides it leeway for relaxation of fiscal deficit roadmap during time of stress.
On the Budget projection about GDP growth, tax collections and deficit, he said these numbers were very realistic and conservative.
"Last year, we faced certain headwinds, and also took some policy decisions. I don't see an issue in meeting these targets," he said. (Photo: Pixabay)