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The Postal Department’s small savings scheme seems to be facing the ripple effect of competitive interest rates on bank term deposits and retail consumers’ penchant to buy gold.
The accretion to the small savings scheme, comprising deposits, savings certificates and Public Provident Fund (PPF), slowed a shade to Rs 16,086 crore in December 2012, against Rs 16,297 crore in the year-ago period.
According to Reserve Bank of India data, as at December-end 2012, the outstanding amount in small savings schemes was lower by Rs 8,782 crore at Rs 6,01,961 crore compared with Rs 6,10,743 crore a year ago.
Among the three heads under the small savings scheme, accretion in December 2012 slowed in the case of deposits and the 15-year PPF (which fetches 8.80 per cent interest, compounded annually) at Rs 14,079 crore (Rs 14,588 crore in December 2011) and Rs 335 crore (Rs 351 crore), respectively.
Savings certificates (National Savings Certificate VIII issue: interest 8.60 per cent, compounded six monthly), however, saw higher fund inflows of Rs 1,672 crore (Rs 1,358 crore).
Within the deposit scheme, the savings bank deposit scheme (fetches 4 per cent interest) and the monthly income scheme (8.50 per cent interest) saw a slowdown in inflows at Rs 7,094 crore (Rs 7,826 crore) and Rs 1,690 crore (Rs 1,954 crore), respectively.
Post office time deposits (interest, which is payable annually but calculated quarterly, ranges from 8.20-8.50 per cent depending on the tenure) and five-year recurring deposits (interest rate: 8.40 per cent compounded quarterly) saw good inflows of Rs 1,806 crore (Rs 1,592 crore) and Rs 3,108 crore (Rs 2,974 crore), respectively. A senior public sector bank official said that though post office interest rates are almost as competitive as bank term deposit rates (for example, State Bank of India is quoting uniform 8.75 per cent interest on term deposits over one year), the attraction of the latter is that operationally they are easy to open and close.
Further, high inflation is prompting retail investors to invest a portion of their surplus in gold, which is seen as a hedge against inflation.
The banker said that if the Post Office hives off its financial services division into a bank then existing banks could face the heat when it comes to garnering resources.
The post office operates through a network of 1,50,000 offices across the country.
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