Ahead of next year’s general elections, Finance Minister Nirmala Sitharaman’s Budget announcements regarding a brand-new investment scheme for women and higher deposit limits for schemes popular with senior citizens can strike a chord with small savers. But while the two-year small savings scheme for women offers rates that, at present, are higher than what most banks offer in 1-2 years tenor, the meagre ₹2 lakh investment limit caps the gains. The large increase in maximum investment limits for MIS and SCSS schemes will provide much-needed succour to senior citizens. Here are more details.

Women power

Dubbed ‘Mahila Samman Savings Certificate’ (MSSC), the one-time new small savings scheme will be made available for a two-year period up to March 2025. This will offer deposit facility up to ₹2 lakh in the name of women or girls for a tenor of two years. The rate of interest is fixed at 7.5 per cent, with partial withdrawal option. Comparing the MSSC rates with bank FDs in 1-2 year bucket, the new scheme’s rates are currently higher than almost 75 per cent banks.

Public sector banks such as SBI, PNB, UCO, Indian Bank, BoM offer 6.75-7.25 per cent interest. Private sector banks such as Axis, HDFC, ICICI offer 7-7.26 per cent. Smaller private sector banks like IndusInd, Bandhan, RBL and IDFC First offer around 7.5 per cent. Small finance banks such as Equitas, Jana, Fincare and Suryoday offer 8 per cent.  

MSSC appears a good option for those looking to park money for two years. However, the humble ₹2 lakh investment limit for MSSC takes the juice out of the scheme because you can earn only about ₹32,000 interest. There is no such limit for bank FDs. There is no clarity on whether investments in the scheme are eligible for section 80C benefits.

More leeway for seniors

The maximum deposit limit for SCSS will go up from ₹15 lakh to ₹30 lakh. The SCSS, which is open only to investors who are 60 years and above, is like a fixed deposit with assured returns that are reset every quarter (the current rate is 8 per cent). The Monthly Income Account Scheme is open to all regular income seekers and carries a lower interest rate of 7.1 per cent. The limit for this is proposed to be enhanced from ₹4.5 lakh to ₹9 lakh for single account and from ₹9 lakh to ₹15 lakh for joint account.

With the enhanced limits, retirees can double their allocation to the sovereign-backed post office schemes and earn more. Presently, retirees also have the option to choose Pradhan Mantri Vaya Vandana Yojana (offers 7.4 per cent a year), which is available only till March 31, 2023, but it carries maximum investment limit of ₹15 lakh. There is lack of clarity on the scheme beyond 2023.

However, both women and seniors may find the need for physical paperwork and visits, in post office schemes, a deterrent compared to options like bank or NBFC FDs and government securities bought from the RBI Retail Direct platform.

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