The government is planning to review the small savings schemes and also to consider a cut in the small savings loans to states in a move that will have far-reaching consequences on state finances.
According to senior finance ministry officials, a sharp rise in such loans to states and an unabated growth in small savings are perhaps the most destabilising factors in their finances.
In the last 10 years small savings loans to states grew 12-fold and are expected to top Rs 61,000 crore in the current fiscal.
The officials pointed out that the debt and guarantees of all states put together had reached an unsustainable 35 per cent of the country
