Poll-bound states account for nearly 25% of savings schemes collection

The interest rate cut order would've affected BJP's campaign in West Bengal the most as it is the 2nd highest contributor to the savings schemes

Finance Minister Nirmala Sitharaman on Thursday scrapped the steep cuts in interest rates on small savings schemes within hours of its rollout claiming that the orders were issued by “oversight”.

“Interest rates of small savings schemes of the government of India shall continue to be at the rates which existed in the last quarter of 2020-2021, i.e, rates that prevailed as of March 2021,” Sitharaman said.

“Orders issued by oversight shall be withdrawn,” the finance minister said within hours of the Department of Economic Affairs announcing sharp cuts on interest rates on various small savings schemes by up to 110 basis points.

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Nirmala Sitharaman's u-turn came on the day of the second phase of Assembly elections in West Bengal and Assam.

Interestingly, according to data collected by the National Savings Institute (NSI), West Bengal is only behind Maharashtra in terms of contributions to the small savings schemes run by post offices and banks.

The rate cut would have had an effect on the BJP's chances not only in West Bengal but also in other poll-bound states as collection from savings schemes from these states account for 23.9% of small savings schemes collection in terms of gross collections and 23.4% in terms of net collections. Where net collections also account for the withdrawal of funds from these schemes. (Net collection = Gross collection - withdrawals)

Tamil Nadu is another major contributor to the schemes and the state is set to vote on April 6 and the BJP is looking to clinch more Assembly seats in the state in alliance with the BJP after only having formed a government in Karnataka among the southern states. Tamil Nadu's contribution to the NSS in terms of gross collections was 4.8% and in terms of net collections, it was 6.6% in 2017-18.

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The latest data for FY21 is not available on the NSI website, however, the data for 2017-18 shows that West Bengal accounted for 13.2% of the net collections out of the Rs 1,58,180.28 crore that was collected in small savings schemes run by post offices and bank at the end of the fiscal year. Maharashtra contributed a little over 15% and were the largest contributors.

When it comes to gross collections in small savings schemes, West Bengal tops the list contributing 15.1% to the collection. Withdrawals in West Bengal were higher and hence its share in terms of net collections is behind Maharashtra.

The interest rate cut of 50-110 basis points would have affected the BJP's campaign in Assam and Kerala too, though they account for a smaller portion of the contribution to these savings schemes.

For now, savers can heave a sigh of relief that the rate cut has been withdrawn. However, a rate cut may be implemented in the next quarter starting July 1 considering consumer price inflation has remained benign.