The decision to raise the investment ceilings in small savings schemes is aimed at benefiting senior citizens and the middle class who park funds in safe government deposit schemes offering higher returns than banks, Finance Secretary TV Somanathan has said.

The Budget 2023-24 raised the maximum deposit limit for Senior Citizen Savings Scheme from Rs 15 lakh to Rs 30 lakh. Also, the maximum deposit limit for Monthly Income Account Scheme will be enhanced from Rs 4.5 lakh to Rs 9 lakh for a single account and from Rs 9 lakh to Rs 15 lakh for a joint account. 

In a post-budget interview with PTI, Somanathan said the ceilings under the Senior Citizen Savings Scheme have been unchanged for quite some time, and the decision to raise the ceiling is primarily a measure for the welfare of the middle class and senior citizens.

"There was a feeling that people in advanced age need safe investment options, and the incomes have increased in the period between the last revision and now. So, this doubling of the ceiling offers senior citizens a chance to put their money in a 100 per cent safe investment with an attractive interest rate, which is significantly higher than in banks," Somanathan said. 

The investment ceiling in post office monthly income schemes has not been revised since 1987. In the case of the Senior Citizen Savings Scheme (SCSS), the investment limit was fixed in 2004. 

The top bureaucrat in the finance ministry said that the decision to revise the ceilings will come at a cost as the government can raise funds at a cheaper rate compared to the 8 per cent interest that it gives under the Senior Citizen Savings Scheme.

"Taking into account the welfare of senior citizens, for whom fixed income instruments are the main source of income... it was decided that this is a cost which the government should bear and therefore the ceilings were increased," he said. 

Similarly, on the monthly income scheme (MIS), which is another popular instrument with the middle class and senior citizens, the decision to revise the investment ceiling was taken. MIS, which is a 5-year deposit scheme, currently offers a 7.1 per cent interest rate.

"There is a cost because it is somewhat expensive compared to the alternative sources from which the government can raise funds, but it was felt that it is something that they deserve, given the circumstances in which we are," Somanathan added.

The government every quarter reviews and fixes the interest rate for small savings schemes. Accounts under Senior Citizens Savings Schemes can be opened by senior citizens above 60 years of age. The deposits can be made for five years.