New Delhi: In what could provide a boost to small savings, the committee set up for comprehensive review of National Small Savings Fund (NSSF) has recommended revision of interest rates in Post Office Saving Account from 3.5% to 4% and an upward revision of the ceiling on annual subscriptions in Public Provident Fund (PPF) from Rs 70,000 to Rs. 1 lakh. The committee has also recommended the discontinuation of Kisan Vikas Patra (KVP) and introduction of 10 year National Saving certificates (NSC) as a long term investment alternative for the KVPs.
The committee headed by Shyamala Gopinath, deputy governor, Reserve Bank of India submitted its report to union finance minister Shri Pranab Mukherjee, here on Tuesday. The committee was set up by the government after accepting the recommendations of the 13th Finance Commission for examination of the design and administration of NSSF to ensure transparency, market linked rates and other reforms to the schemes.
The committee has also recommended benchmarking of interest rates on other small savings schemes to rates of government securities of similar maturity with positive spread of 25 basis points. Another recommendation is reducing the maturity period of monthly income scheme and NSC from six to five years. The committee is also in favour of abolition of payment of commission to agents on PPF and Senior Citizensâ€™ Savings Scheme and reduction of commission paid on Standardized Agency System from 1% to 0.5%.
Other members of the committee include R. Sridharan, MD, State Bank of India, Shaktikanta Das, additional secretary (budget), ministry of finance, Rajiv Kumar, secretary general, Ficci and Anil Bisen, economic advisor, ministry of finance.
The terms of reference of the committee included review of the existing parameters for the small savings schemes in operation recommending mechanisms to make them more flexible and market linked; review of the existing terms of loans extended from the NSSF to the Centre and States; recommending the changes required in the arrangement of lending the net collection of small savings to Centre and States and review of the administrative arrangement including the cost of operation.