New Delhi: Department of Economic Affairs Secretary Atanu Chakraborty has hinted at revision in small savings rate next quarter, in line with the market rate, a development that could lead to speedier transmission of the monetary policy rate.
During the current quarter, the government refrained from cutting interest rates on small savings schemes, including the Public Provident Fund (PPF) and National Savings Certificate (NSC), despite moderating bank deposit rates.
"In India, right now we have about Rs 12 lakh crore in small savings schemes and roughly Rs 114 lakh crore in bank deposits. So the liability side of banks is getting affected by Rs 12 lakh crore. When banks say this, it seems a bit of a tail wagging the dog situation," he said.
Nevertheless, he said that the rate of small savings should have some linkages to market rate, which is largely determined by the G-sec rates.
Stating that the Shyamala Gopinath Committee report has been accepted, but the operation of the linkage was still in works, he said "wait for this quarter interest rates. That will give you a fairly good indication."
There has been some signalling issue, which is being looked at, he told PTI in an interaction.
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Bankers have been complaining that high small savings rates prohibits them to cut their deposit rates immediately to check flight of savings.
Currently, there is a difference of nearly 100 basis point between deposit rate of banks and small savings rate for one-year maturity.
He further said that although the government is not dependent on small savings schemes, there is no plan to do away with the scheme as people use those instruments.
Asked if the government would resort to additional mop up to fund its increased fiscal deficit target, Chakraborty said there will be no extra market borrowing this year and there was no question of monetisation of the deficit.
The government has raised fiscal deficit target in the Union Budget to 3.8 per cent of the GDP from 3.3 per cent pegged earlier for 2019-20 due to revenue shortage.
The government resorted to 'escape clause' under the Fiscal Responsibility and Budget Management (FRBM) Act which provides it leeway for relaxation of fiscal deficit roadmap during the time of stress.
On the Budget projection about GDP growth, tax collections and deficit, he said these numbers were very realistic and conservative.
"Last year, we faced certain headwinds, and also took some policy decisions. I don't see an issue in meeting these targets," he said.
(PTI Report)
