The Hindu : National : States likely to get relief on small savings loans

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Sunday, Dec 10, 2006
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States likely to get relief on small savings loans

Special Correspondent

New Delhi: States are likely to be given relief on high interest rates on loans from the National Small Savings Fund (NSSF), based on recommendations made by a sub-committee of the National Development Council here on Saturday. Several State Governments had complained about this issue to the sub-committee, headed by Finance Minister P. Chidambaram, at a meeting last month.

The sub-committee has proposed that the interest rates on loans taken by State Governments from NSSF from 1999-2000 to 2002-03 be reset at 10.5 per cent, down from 13.5, beginning next fiscal. It has also suggested that the interest rate on current NSSF loans continue at 9.5 per cent.

Apart from the Finance Minister, the sub-committee included the Planning Commission Deputy Chairman, a representative of the Reserve Bank of India (RBI), Finance Ministry officials, and Finance Ministers of West Bengal, Tamil Nadu, Andhra Pradesh, Chhattisgarh and Punjab.

Small savings mobilised by the State Governments are deposited in the NSSF, created in 1999 in the Public Accounts of India. All collections to the fund are currently transferred to States complaining of accumulated high cost debts.

The Centre acts as a trustee of the fund. States have demanded that all collections in NSSF be transferred to States and the interest rate on past and current high cost NSSF loans be reduced.

The interest on NSSF loans was already reduced from 13.5 per cent in 1999-2000 to 9.5 from 2003-04. The committee also recommended that small savings collections be shared between States and the Centre in the ratio 80:20 from next fiscal with the option for the States to take up to 100 per cent of the collections. The revised sharing pattern will take effect from April 1, 2007.

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