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Picture Courtesy: The Hindu

Context:

Small Savings Schemes, also called Post Office Savings Schemes, are a popular way to channel household savings. The government sets interest rates quarterly, and for the current quarter, rates remain unchanged, making them attractive for investors.

What are small savings schemes?

Small Savings Schemes are government-backed investment programs designed to encourage households to save. They are often called Post Office Savings Schemes because many are offered through post offices across India.

Key Features:

• Safety: Capital and interest are guaranteed by the government, making them low-risk. 

• Regular Interest: Interest rates are reviewed and set quarterly by the government.  

• Variety of Options: Schemes cater to different investment horizons, financial goals, and risk preferences.
• Tax Benefits: Some schemes, like Public Provident Fund (PPF) and Sukanya Samriddhi Account (SSA), provide tax exemptions under Section 80C.

Popular Schemes:

• Public Provident Fund (PPF) – Long-term savings with tax benefits. 

• Kisan Vikas Patra (KVP) – Fixed-term investment with assured returns. 

• National Savings Certificate (NSC) – Medium-term investment with tax benefits. 

• Senior Citizens Savings Scheme (SCSS) – High returns for retirees  

• Post Office Time Deposits – Fixed deposits with different maturities. 

• Sukanya Samriddhi Account (SSA) – Long-term investment for girl children. 

Current Status:

• The total outstanding balance in small savings schemes was ~ ₹18.1 lakh crore as of February 2024 (growth ~13.8 % year‑on‑year). (Source: The Financial Express) 

• Another source estimates around ₹18.7 lakh crore by March 2024 (compound annual growth ~16 % since March 2019). (Source: The Financial Express) 

• Net collections (i.e., deposits minus withdrawals) for FY23 dipped to ~ ₹3.04 trillion, down ~8.5 % from FY22 (₹3.33 trillion) — first dip in 11 years. (Source: BS)

Here are representative rates: (Source: Indian Bank)

Impact of Small savings scheme:

Household Savings & Financial Inclusion: Small savings’ share in household savings rose from 0.7% (2013-14) to ~9% in recent years. Total outstanding balance: ₹18.7 lakh crore as of March 2024. (Source: Financial Express) 

Government Borrowing & Fiscal Impact: Net collections in FY23: ₹3.04 lakh crore, down 8.5% YoY — first dip in 11 years. These schemes help fund the government via the National Small Savings Fund (NSSF). (Source: Business Standard) 

Behavioural Economics & Investment Shifts: Higher returns (7.1–8.2%) made schemes more attractive than bank FDs (~6.5–7%). CAGR of outstanding balances: ~16% since FY2019. (Source: Economic Times) 

Social Impact (Targeted Benefits): Sukanya Samriddhi Yojana: 41% YoY growth (Feb 2023–24) – supports girl child savings. Senior Citizens’ Scheme: 28% growth – promotes elderly financial security. (Source: Economic Times) 

Key Challenges: 

• Declining Net Collections: Net collections fell to ₹3.04 lakh crore in FY23, down 5% YoY — first decline in 11 years. (Source: Business Standard) 

• Impact of New Tax Regime: Under the new tax regime (no deductions), popular tax-saving schemes like PPF and SSY have become less attractive. Sharp drop in fresh subscriptions reported in 2023–24. (Source: Business Today) 

• Liquidity & Lock-in Constraints: Most schemes have long lock-in periods (e.g., PPF: 15 years), limiting liquidity. (Source: The Hindu) 

• Fiscal Pressure from NSSF: Asset-liability mismatch in the National Small Savings Fund (NSSF): long-term payouts vs shorter-term inflows. (Source: The Hindu) 

• Awareness & Overlap Issues: Multiple schemes with overlapping benefits (e.g., RD, TD, NSC) confuse rural and first-time investors. (Source: IE) 

Way Forward:

Maintain Attractive Returns: Continue offering competitive interest rates to retain investor confidence. Example: PPF – 7.1%, NSC – 7.7%, SCSS – 8.2% ((Source: Financial Express, Oct 2025)

Digitalization & Ease of Access: Expand Aadhaar-based e-KYC for RD, PPF, and other accounts. Goal: Paperless account opening, withdrawals, and account management ((Source: TOI, Oct 2025)

Active Account Management: Freeze inactive accounts after 3 years to prevent misuse of funds. Encourages investors to monitor and manage accounts regularly ((Source: ET Wealth, Oct 2025)

Policy Flexibility: Periodically review interest rates in line with RBI repo rates and fiscal constraints. Explore sachet-sized investment options to attract small investors ((Source: Reuters, Jan 2025) 

Source:  The Hindu