Richa Mishra
Harish Damodaran

New Delhi , Aug. 15

THE post office continues to be a major attraction for savers, going by the 32.45 per cent higher collections under small savings schemes during the first quarter of the current fiscal relative to that mobilised over the same period of 2003-04.

During April-June 2004, small savings collections have grossed Rs 42,307.01 crore, compared to last year's corresponding figure of Rs 31,941.30 crore.

The cumulative year-on-year growth in collections, thus, works out to 32.45 per cent, which is way above the 13.79 per cent increase assumed in the Budget Estimates for 2004-05.

The surge in small savings collections is striking considering that the growth in aggregate deposits of scheduled commercial banks during the current fiscal up to July 23, at Rs 64,997 crore, has been lower than the increase of Rs 70,131 crore registered during the same period last year.

Much of the buoyancy in small savings is happening in deposit schemes (post office time deposit, recurring deposit, savings account, monthly income account), where gross collections have so far touched Rs 26,263.21 crore this year, compared to last year's corresponding figure of Rs 18,981.47 crore.

On the other hand, the growth has been less pronounced for savings certificates (National Savings Certificate and Kisan Vikas Patra) and the public provident fund (PPF), with gross collections amounting to Rs 9,353.70 crore during April-June, 2004 (against Rs 7,218.03 crore during April-June 2003) in the former and Rs 6,690.10 crore (Rs 5,741.80 crore) in the latter.

Finance Ministry officials say that the attraction for the post office deposit schemes stems from the higher interest rate they offer vis-à-vis what banks give.

Since March 1, 2003, the interest on post office time deposits has been set at 6.25 per cent for one year, 6.50 per cent for two years, 7.25 per cent for three years and 7.50 per cent for five years.

Commercial banks, on their part, are typically offering 4.75-5.5 per cent on 271-364 days deposits, with the highest (6 per cent) being given by Tamilnad Mercantile Bank and City Union Bank.

For deposits of 1-2 years, only City Union Bank is offering an interest rate (6.5 per cent) on par with the post office, with most banks providing 5-6 per cent.

For 2-3 years and 3-5 years deposits, City Union Bank is again offering the maximum rates of 6.5 per cent and 6.75 per cent.

The officials pointed out that the preference for savings certificates and PPF was much less because the high returns (up to 8 per cent, excluding tax break benefits) are somewhat offset by their long lock-in periods and illiquidity relative to bank deposits.

In fact, between 1999-2000 and 2003-04, gross collections under the savings deposits have shot up from Rs 34,650 crore to Rs 91,300 crore, whereas the growth for savings certificates (from Rs 31,127 crore to Rs 36,500 crore) and PPF (from Rs 9,658 crore to Rs 17,200 crore) has been muted.

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