Minister of state for communications and information technology Jyotiraditya Scindia has urged Finance Minister P Chidambaram to raise interest rates on post-office savings schemes to make them more attractive investment instruments.
“Unless interest rates of small savings schemes are revised upwards, there may not be any change in the present situation due to which post office small savings schemes will keep losing their attractiveness rapidly,” Scindia said in a letter written to Chidambaram last week.
A study carried out by Associated Chambers of Commerce and Industry (Assocham) has showed that total receipts under the small saving schemes during the financial year 2006-07 were worth Rs. 1,37,560 crore against Rs. 1,73,283 crore in the previous year. This was much lower than total saving bank deposits with commercial banks that stood at Rs. 6,55,274 crore at the end of 2006-07.
“The main cause of concern is present interest rates due to which investors of these schemes are facing financial loss,” Scindia said.
“It would be pertinent to point out that large number of customers availing these schemes are small investors residing in rural areas and are being deprived off the financial benefits of higher rate of interests offered by banks and financial institutions,” he said.
Commercial banks raised the deposit rates by close to two percentage points during the last two years, after the Reserve Bank of India adopted a tight monetary stance to control money supply. Some banks currently offer interest rates of about 9 per cent on certain fixed deposit schemes.
The Parliamentary Standing Committee has also expressed its concern over decline in business due to unattractive benefits to depositors when compared with other savings/investment options available in the market, Scindia said.
He said the Ministry of Communications and IT has been taking up the matter with the Finance Ministry since 2006. “Though your ministry has recently taken some steps like restoration of 5 per cent bonus on monthly income scheme, tax benefit on investment in 5 Year time Deposit and Senior Citizen Saving Scheme, but these are insufficient to attract deposits in Post Office Small Savings Schemes,” he said.