Small saving plans may get insurance add on

Small saving plans may get insurance add on

NAGPUR: Amid concerns over the falling household savings rate, it has been mooted to revamp the postal small savings plans which include schemes like National Savings Certificate (NSC) or public provident fund (PPF). In an annual review meeting of the National Savings Institute (NSI), the agency which manages the schemes, it was suggested to come up with changes in the existing plans to make them attractive. This includes incorporating pension and insurance features in the scheme. NSI is headquartered at Nagpur.

Brainstorming on the new plans will start soon, after which a formal proposal will be submitted to the ministry of finance (MoF), a source informed.

Small savings schemes which were once popular among the middle class have taken a hit during the last few years. In 2012-13, the withdrawals exceeded deposits by Rs 500 crore. In the current fiscal however, net collections stand at Rs 5500 crore.

At present, the five year postal monthly recurring deposit scheme has an insurance component but the benefit is negligible. In case the investor dies in between, the amount equivalent to the two years' deposit capped at Rs 50 a month is given. However, this comes to a miniscule sum and it is time that the cap is revised. But in order to come up with a proper insurance or pension plan an altogether new scheme may have to be designed, the source added.

During the meeting, it was mooted by the senior officials to come up with ideas for new plans or amend in the existing ones. There are chances that the new plans may have a higher return considering the inflation, sources said. The savings rates currently are in the range of 26% to 28% as against 30% to 31%, a few years ago, the source informed.

Apart from this, there are chances that the returns on NSI's schemes may be increased by 0.1% in the normal course. Rates are revised in the month of March every year. Currently, the returns range from 8.5% to 9.3. The highest rates are for the senior citizens deposits which are sold through banks. With the postal department in the process of putting in place core banking system it is expected that managing the schemes would become much easier.

The money collected through the NSI schemes is accumulated into the National Small Savings Fund (NSSF), which in turn is used to provide loans to state governments. If the withdrawals exceed collections then funds have to be taken out from the NSSF corpus. This year the gross collection stands at Rs 1,11000 crore till October as against Rs1,96000 crore in the entire last fiscal.

Plans for large-scale campaigns to popularize the scheme were also firmed up during the meeting. NSI's joint director, A K Chauhan said that the advertisement campaign including radio jingles would begin soon. The meeting was headed by joint secretary (budget) from the ministry of finance Rajat Bharvaga and under secretary RK Thakur.