With the fall of Saradha and similar money pooling ponzi schemes, there has been an unexpected surge in small savings in West Bengal, collected through post office. This will be a breather for the state, as after a gap of nearly three years the collections are nearing peak levels.
This year, government officials are upbeat that small savings collections will exceed Rs 30,000 crore, an amount higher than its annual borrowing. Interestingly, the government would enjoy a moratorium of five years from repayment of loans through small savings.
Small savings used to be a key source of loans for the state under the Left Front government regime. However, ever since TMC government has come into power, rise in ponzi schemes and falling interest rates on post office small savings schemes, had led to a stagnation in the growth of small savings collections.
West Bengal’s annual borrowing hovers between Rs 20,000-25,000 crore, which it raises through state development loan. One of the key demands of the West Bengal government under state finance minister Amit Mitra has been to grant moratorium on loan repayment, which accounts for an annual outgo between Rs 24,000-25,000 crore.
Gross small savings in West Bengal | |
2010-11 | Rs 33,251 crore |
2011-12 | Rs 23,586 crore |
2012-13 | Rs 24,640 crore |
2013-14 | Rs 25,448 crore |
April-June quarter | |
2010-11 | Rs 8,639 crore |
2011-12 | Rs 5,953 crore |
2012-13 | Rs 5,841 crore |
2013-14 | Rs 5,860 crore |
2014-15 | Rs 7,681 crore |
Source: WB Govt |
A hike in interest rates in small savings to the tune of 10 to 20 basis points just before the Lok Sabha elections, has led to a significant rise in the small savings pool in West Bengal.
From 2012-13 onwards, state governments have been given the option of availing either the entire net small savings collections within the state or only 50 per cent of the net collections.
In one year’s time, between 2010-11 and 2011-12, gross small savings in the state, fell by nearly 29 per cent from Rs Rs 33251 crore to Rs 23586. While bank deposits not seen a major growth since 2011-12 in West Bengal, dubious fund raising companies gained prominence in rural areas in the last two-three years.
In 2011-12, seven states did not receive any fresh investment from NSSF (National Small Savings Fund) as their net collections had turned negative, according to data from Reserve Bank of India.
In 2012-13 and 2013-14(BE), 16 out of the 28 states opted for a 50 per cent share of net small savings collections.
States which opted for a 100 per cent share include those with large small savings collections, such as Uttar Pradesh, Gujarat and Madhya Pradesh; those which are fiscally constrained like West Bengal and Kerala and all the special category states in the north-east, barring Mizoram, according to RBI report.
West Bengal’s outstanding debt stood at more that Rs 2 lakh crore at the end of March 2014.