Report regarding the recommendations of the Committee on Thirteenth Finance Commission for comprehensive review of National Small Savings Fund (NSSF)
The Thirteenth Finance Commission in its Report had, inter alia, recommended that all
aspects of the design and administration of the NSSF be examined with the aim of bringing
transparency, market linked rates and other much needed reforms to the scheme. As a follow
up of this recommendation, the Government had constituted a Committee on 8th July, 2010,
headed by Smt. Shyamala Gopinath, the then Deputy Governor, Reserve Bank of India for
comprehensive review of NSSF. The terms of reference of the Committee included review of
the existing parameters for the small saving schemes in operation and recommend
mechanisms to make them more flexible and market linked; review of the existing terms of
the loans extended from the NSSF to the Centre and States and recommend on the changes
required in the arrangement of lending the net collection of small savings to Centre and
States; review of other possible investment opportunities for the net collections from small
savings and the repayment proceeds of NSSF loans extended to States and Centre; review of
the administrative arrangement including the cost of operation; and review of the incentives
offered on the small savings investments by the States.
2. The Committee submitted its report to the Government on 7th June, 2011.
Comments/views of Department of Posts, Department of Revenue, Department of Financial
Services, Department of Expenditure and all State/Union Territory Governments were sought
on the recommendations made by the Committee.
3. The recommendations of the Committee have been considered in detail, taking into
account the views/comments received from other Departments, States/UTs and
representations received from various agents' associations and others. After detailed
examination the following decisions have been taken:-
Rationalisation of Schemes
(i) The maturity period for Monthly Income Scheme (MIS) and National Savings
Certificate (NSC) will be reduced from 6 years to 5 years.
(ii) A new NSC instrument, with maturity period of 10 years, would be introduced.
(iii) Kisan Vikas Patras (KVPs) will be discontinued.
(iv) The annual ceiling on investment under Public Provident Fund (PPF) Scheme will
be increased from Rs. 70,000 to Rs. 1 lakh.
(v) Interest on loans obtained from PPF will be increased to 2% p.a. from existing 1%
p.a.
(vi) Liquidity of Post Office Time Deposit (POTD) - 1, 2, 3 and 5 years - will be
improved by allowing pre-mature withdrawal at a rate of interest 1% less than the
time deposits of comparable maturity. For pre-mature withdrawals between 6-12
months of investment, Post Office Savings Account (POSA) rate of interest will be
paid.
Interest Rates on Small Savings Instruments
(i) The rate of interest paid under Post Office Savings Account (POSA) will be
increased from 3.5% to 4% p.a.
(ii) The rate of interest on small savings schemes will be aligned with G-Sec rates of
similar maturity, with a spread of 25 basis points (bps) with two exceptions. The
spread on 10 year NSC (new instrument) will be 50 bps and on Senior Citizens
Savings Scheme 100 bps. The interest rates for every financial year will be notified
before 1st April of that year.
(iii) Assuming the date of implementation of the recommendations of the Committee
as 1st December, 2011, the rate of interest on various small savings schemes for
current financial year on the basis of the interest compounding/payment built in the
schemes, will be as given below:-
Instrument | Current Rate (%) | Proposed Rate (%) |
Savings Deposit | 3.50 | 4.0 |
1 year Time Deposit | 6.25 | 7.7 |
2 year Time Deposit | 6.50 | 7.8 |
3 year Time Deposit | 7.25 | 8.0 |
5 year Time Deposit | 7.50 | 8.3 |
5 year Recurring Deposit | 7.50 | 8.0 |
5-year SCSS | 9.00 | 9.0 |
5 year MIS | 8.00 (6 year MIS) | 8.2 |
5 year NSC | 8.00 (6 year NSC) | 8.4 |
10 year NSC | New Instrument | 8.7 |
PPF | 8.00 | 8.6 |
(iv) Payment of 5% bonus on maturity of MIS will be discontinued.
Commission to Agents
(i) Payment of commission on PPF schemes (1%) and Senior Citizens Savings
Scheme (0.5%) will be discontinued.
(ii) Agency commission under all other schemes (except MPKBY agents) will be
reduced from existing 1% to 0.5%.
(iii) Commission at existing rate of 4% will continue for Mahila Pradhan Kshetriya
Bachat Yojana (MPKBY) agents.
(iv) Incentives, if any, paid by the State/UT Governments will be reduced from the
commission paid by the Central Government.
Investments from NSSF
(i) The minimum share of States in net small savings collections in a year, for
investment in State Governments Securities, will be reduced from 80% to 50%. The
remaining amount will be invested in Central Government securities or lent to other
willing States or in securities issued by infrastructure companies/agencies, wholly
owned by Central Government.
(ii) Yearly repayment of NSSF loans made by Centre and States, will be reinvested in
Central and State Government securities in the ratio of 50:50.
(iii) The period of repayment of NSSF loans by Centre and States will be reduced to
10 years, with no moratorium.
(iv) For the current financial year the prevailing interest rate of 9.5% will continue.
From 1st April, 2012 revised interest rate will be notified.
(v) Half yearly payment of interest by the Centre and the States will be introduced.
(vi) Interest rate on existing investments from NSSF in Central Government securities
till 2006-07 will be re-set at 9% and on those from 2007-08 till 2010-11 will be re-set
at 9.5%.
Operational Issues of NSSF
(i) A Monitoring Group drawn from Ministry of Finance, Reserve Bank of India,
Department of Posts, State Bank of India, other select banks and select State
Governments will be set up to resolve various operational issues like reducing the
time lag between collection and investment, etc.
4. Necessary notifications, including those requiring amendments to rules of various small
saving schemes and National Small Savings Fund (Custody and Investment) Rules, 2001 will
be notified separately. The above decisions will take effect from the dates to be specified in
the notifications.
5. This has the approval of Finance Minister.
No comments:
Post a Comment