Daily Current Affairs : 23-October-2023
In a recent development, the Indian government has made changes to the interest rates of small savings schemes for the December quarter. These adjustments affect various savings instruments, with the primary goal of encouraging regular savings among citizens of all age groups. This essay will delve into the government’s decision, the background of small savings instruments, and the latest amendments to two prominent schemes.
Government’s Interest Rate Adjustment
The government periodically reviews and updates the interest rates on various small savings schemes. For the December quarter, the interest rate on the five-year recurring deposit scheme has been raised. However, it’s important to note that the rates for all other small savings schemes have been retained.
About Small Savings Instruments (SSIs)
Small Savings Instruments (SSIs) are a set of savings tools managed by the central government with the aim of promoting regular savings among citizens, regardless of their age. These instruments include:
- National Saving Certificate (NSC)
- Public Provident Fund (PPF)
- Kisan Vikas Patra (KVP)
- Sukanya Samriddhi Scheme
When individuals save through these schemes, the funds are directed to the National Small Savings Fund (NSSF), which is managed by the government. The interest rates for these schemes are reset every quarter. Since 2016, the interest rate resetting has been primarily based on government securities’ yields with some additional margin for senior citizens, as recommended by the Shyamala Gopinath Committee.
Latest Developments
The government’s recent changes in small savings schemes indicate a proactive approach to encourage saving habits among the public. Two noteworthy amendments have been introduced:
- National Savings (Monthly Income Account) Scheme, 2019: The National Savings (Monthly Income Account) Scheme, 2019, has been amended through the National Savings (Monthly Income Account) (Amendment) Scheme, 2023. Under this amendment, the maximum investment limit for a single account has been raised from ₹4.5 lakh to ₹9 lakh. For joint accounts, the limit has been increased from ₹9 lakh to ₹15 lakh, effective from April 1, 2023.
- Senior Citizen Savings Scheme, 2019: Similarly, the Senior Citizen Savings Scheme, 2019, has undergone amendments through the Senior Citizens Savings (Amendment) Scheme, 2023. The maximum investment limit for this scheme has been raised from ₹15 lakh to ₹30 lakh.
These amendments are aimed at making these schemes more attractive for investors and encouraging higher savings, especially among senior citizens and individuals seeking monthly income options.
Important Points:
- The Indian government recently raised the interest rate on the five-year recurring deposit scheme for the December quarter, while retaining rates for other small savings schemes.
- Small Savings Instruments (SSIs) are managed by the central government to encourage regular savings regardless of age. These instruments include National Saving Certificate (NSC), Public Provident Fund (PPF), Kisan Vikas Patra (KVP), and Sukanya Samriddhi Scheme.
- Funds saved through these schemes go to the National Small Savings Fund (NSSF), managed by the government. Interest rates are reset quarterly based on government securities’ yields since 2016, with additional benefits for senior citizens as recommended by the Shyamala Gopinath Committee.
- Notable amendments have been made to specific schemes:
- National Savings (Monthly Income Account) Scheme, 2019: Maximum investment limit increased from ₹4.5 lakh to ₹9 lakh for single accounts and from ₹9 lakh to ₹15 lakh for joint accounts, effective from April 1, 2023.
- Senior Citizen Savings Scheme, 2019: Maximum investment limit raised from ₹15 lakh to ₹30 lakh.
- These changes aim to make the schemes more attractive, encouraging higher savings, especially among senior citizens and those seeking monthly income options.
- The government’s proactive approach reflects its commitment to promoting a culture of saving, contributing to citizens’ financial security, and bolstering the National Small Savings Fund for the country’s economic growth.
Why In News
The government raised the interest rate on the five-year recurring deposit scheme for the December quarter and retained the rates for all other small savings schemes. This decision aims to encourage long-term savings and investments, providing stability to the financial market.
MCQs about Revitalizing Indian Savings
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What is the primary objective of the recent adjustments made by the Indian government in small savings schemes?
A. To decrease the interest rates across all schemes
B. To encourage regular savings among citizens of all age groups
C. To limit the maximum investment amount for all schemes
D. To abolish small savings schemes altogether
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Which committee’s recommendations are followed for setting interest rates on small savings schemes, especially for senior citizens?
A. Raghuram Rajan Committee
B. Shyamala Gopinath Committee
C. Arvind Subramanian Committee
D. Urjit Patel Committee
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What is the purpose of the National Small Savings Fund (NSSF) in India?
A. To provide loans to small businesses
B. To fund government infrastructure projects
C. To manage funds raised from small savings schemes
D. To support education and healthcare initiatives
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What significant change has been made to the National Savings (Monthly Income Account) Scheme, 2019, as per the recent amendments?
A. Reduction in the interest rates
B. Increase in the minimum investment limit
C. Increase in the maximum investment limit for single and joint accounts
D. Removal of the scheme from the small savings offerings
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