Government Savings Promotion Act

Government proposed creation of a new Government Saving Promotion Act during the budget of 2018. The Amendments proposes that It will merge Government Savings Certificates Act, 1959 and Public Provident Fund (PPF) Act, 1968 with the Government Savings Banks Act, 1873. The move intends to remove existing ambiguities due to multiple Acts and rules in small saving schemes (SSSs) and add more flexibility. The amendments provide for are
  • Provision of premature closure of Small Savings Schemes to deal with medical emergencies and higher education needs.
  • There should be a guardian to invest in SSSs on behalf of minor(s) to promote culture of savings among the children
  • There would be provisions of accounts for differently abled persons, which was not clear in prior acts.
In the Present Scenario, there has been a sharp rise in government borrowings from Small Saving Schemes (SSSs) in the past 5 years, which distorts the interest rate structure and raises the cost of funds in current economic situation. Small savings schemes accounted to 20.9% of the total Central Govt. borrowing in the year 2018, which is a sharp rise of 17.2% in FY 2017 and 2.4% in FY 2014. The Government needs to create a more conducive environment for monetary policy transmission by aligning the interest rates of SSSs with the market or with benchmark G-Sec yield. A government security (G-Sec) of the Indian government is a debt obligation to fund their fiscal deficit. They are tradable and can be issued either by the central or the state government. They can be for short term as well as long term.

 Small Saving Schemes (SSSs) –

They are important source of household savings for providing social benefit. These can be classified under three heads –
  • Postal deposits: Savings account, recurring deposits, time deposits of varying maturities and monthly income scheme (MIS).
  • Savings certificates: National Small Savings Certificate & Kisan Vikas Patra (KVP).
  • Social security schemes: Public Provident Fund (PPF), Senior Citizens Savings Scheme (SCSS) & Sukanya Samridhi Account Scheme.
Features of Small Saving Scheme – They generally offer higher interest rates compared to bank deposits. Some of the small savings schemes offer income tax benefits as well as assured return and government’s guarantee. All the money pooled form different SSSs goes to National Small Savings Fund (NSSF) which was established in 1999 within the Public Account of India. The government has reduced the minimum annual deposit requirement for accounts under the Sukanya Samriddhi Yojana from Rs 1,000 earlier to Rs 250 now. The small savings scheme was launched as a part of Beti Bachao Beti Padhao (BBBP) campaign. It aims to motivate parents to open an account in the name of a girl child and deposit their savings for her future well-being. The Sukanya Samriddhi Account is opened to facilitate the education and marriage expenses of girl children. The minimum deposit starts from Rs 250 to a maximum of Rs 1.5 lakhs. The minimum amount has to be invested every year for up to 15 years from when the account was opened. The account will then continue to earn interest until maturity. A parent or any legal guardian of the girl child can open an account in the name of the girl child until she attains the age of ten years. She can withdraw 50% of the money after reaching age of 18 yrs for her higher education. The 18 years deadline also helps in preventing child-marriages. The annual deposit qualifies for Tax rebate under Section 80C benefit up to Rs 1.5 lakh annually. and also the maturity benefits are non-taxable. The rate of return is high at 8.5% in comparison to other government backed saving schemes Iike PPF. LOOKING FOR MORE Credit Score    Home Loan    Loan Against Property    balance-transfer    Business Loan    Personal Loan