West Bengal, which is in the midst of a high-stakes assembly election, has the highest collection of around Rs 90,000 crore from small savings schemes like NSC and PPF among states and union territories, accounting for about 15% of the total corpus. It is followed by Uttar Pradesh, the most populous state, with a gross collection of Rs 69,660.70 crore out of a total collection of Rs 5.96 lakh crore in 2017-18 (last updated), according to data compiled by the National Savings Institute under the finance ministry.
The government rescinded a steep interest rate cut on small savings schemes announced the night before on Thursday. The ministry’s office memorandum to reverse the rate cut on small savings schemes was issued just hours after the finance minister called Wednesday’s notification an “oversight.”
While the government announces interest rates for small savings schemes at the end of each quarter, Wednesday’s decision to cut interest rates by up to 1.1% across various small savings schemes, including the Public Provident Fund (PPF) and National Savings Certificate (NSC), came a day before the second phase of voting in West Bengal and Assam.
The rate of interest on various small savings schemes for the first quarter of 2021-22, beginning April 1 and ending June 30, 2021, would remain unchanged from those notified for the fourth quarter of 2020-21 (January 1 to March 31, 2021), the finance ministry said in an office memorandum in suppression of its previous order. According to National Savings Institute data, West Bengal has been a leader in small savings scheme collection, with collections hovering around 12-15 per cent in recent years.
The National Savings Institute is a department of the Finance Ministry’s Department of Economic Affairs.
During 2017-18, Assam received Rs 9,446.37 crore, Kerala received Rs 14,763.01 crore, Puducherry received Rs 1,082.40 crore, and Tamil Nadu received Rs 28,598.18 crore. Voting for five assembly elections began on March 27, with Assam being the first to go to the polls and West Bengal concluding with its eighth phase of voting on April 29. On April 6, assembly elections in Tamil Nadu, Kerala, and Puducherry will be held in a single phase.
On May 2, the votes for the four states and one union territory, Puducherry, will be counted. Opposition leaders have expressed concern that the rate cut will be implemented after the assembly elections.
Taking a swipe at Finance Minister Nirmala Sitharaman after she announced that the government will withdraw orders to reduce interest rates on small savings schemes, the Congress said on Thursday that it is difficult to imagine how the economy works when such a duly approved order affecting crores of people can be issued by an “oversight.”
When inflation is around 6% and expected to rise, the BJP government is offering interest rates below 6%, hitting savers and the middle class below the belt, according to senior Congress leader P Chidambaram. “The BJP government decided to launch another attack on the middle class by slashing interest rates and profiting. When caught, the FM uses the lame excuse of “inadvertent error.” “On Twitter, the former finance minister stated.
The Trinamool Congress mocked the Centre as well. While Derek O’Brien and Mahua Moitra dismissed it as an April Fool’s joke, Yashwant Sinha, who recently switched from the BJP to the TMC, tweeted, “Rollback Modi.”
Sitaram Yechury, General Secretary of the CPM, expressed concern that the government had only postponed the cuts to allow for the assembly elections. Uttar Pradesh is followed by Maharashtra, which collected Rs 63,025.59 crore, and Gujarat, which collected Rs 48,645.28 crore. Gross collection only accounts for inflows and does not account for redemption.
The gross collection data includes small savings collections in post offices as well as bank collections. Because most small savings schemes have a lock-in period, they provide the government with long-term funds. It contributes to the financing of the fiscal deficit.