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Mutual funds investment is becoming popular, small savings schemes losing sheen, says report
National  
Financialexpress

In a major worry, small savings schemes, including public provident funds, are witnessing a sharp decline in terms of monthly receipts

 

In a major worry, small savings schemes, including public provident funds, are witnessing a sharp decline in terms of monthly receipts, as per the latest Reserve Bank of India (RBI) data obtained by the Indian Express. During the first eight years of financial year 2017-18, receipts for small savings schemes stood at Rs 40, 429 crore. During the same corresponding period of the financial year 2016-17, the amount shot up to Rs 2,75,682 crore, the report says. In case of public provident funds, the receipts amounts were Rs 1,775 crore during the eight-month period between April and November 2017. The amout took a dip from the Rs 5,722 crore, which was the PPF receipts amount in the corresponding period of the previous year, the report says.
 
While the decline in receipts for small savings schemes was evident, it came even as mutual funds are increasingly getting more investments, the report says. In this period the Centre has also revised interest rates on small savings schemes on a quarterly basis beginning April 1, 2016 as it had decided to align interest rates on several such schemes with government securities. A senior official with the Department of Posts cited the interest rate is one factor that is keeping investors away, but there are others, too.
 
While interest rates on 1-5 year term deposits were at 8.4 per cent in March 2016. However, those rates currently stand at 6.6 per cent for 1-year deposits and 7.4 per cent for a 5-year deposit. For National Savings Certificates, the interest offering has come down from 8.5 per cent to 7.6 per cent in the same period, whereas for Kisan Vikas Patra it is down from 8.7 per cent to 7.3 per cent. The interest rates on PPF have come down from 8.7 per cent in March 2016 to 7.6 per cent.
 

 

“Equity market returns have been good over the last few years and mutual funds are attracting a lot of retail investors. Besides, there are some scheme-level issues that need to be addressed as in case of Sukanya Samriddhi Yojana, where the lock-in period is very high and interest rates have gone down,” an official was quoted as saying by IE.
 
“Mutual funds have become a big draw and the low interest offering on these schemes is not helping them. However, while income on post office schemes were earlier not subjected to TDS, the provision of TDS on the income from many of these schemes is dissuading investors,” said Asset Managers, a Delhi-based financial advisory firm, Surya Bhatia said.
 

 
 


 
 


 
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