New Delhi: The Finance Minister, P. Chidambaram, has said there would be no increase in the interest rate of small savings deposits in post offices, stating that States are averse to any further hike in their cost of borrowing from the national small savings fund (NSSF). He also said that administered interest rates on small savings would continue to be benchmarked against average Government securities (G-sec) yields.

The Finance Minister said that any increase in small savings deposit rates would require a concomitant increase in the on-lending rate to the States.

Chidambaram said that net collections (gross collections minus withdrawals) under the small savings scheme still remain positive and there was no evidence of any net outflow of deposits from such schemes.

Net collections under small savings schemes declined 38.93 per cent in April-February 2006-07 to Rs45,191 crore as against Rs74,002 crore collected in the same period the previous fiscal.

Chidambaram said withdrawal did not mean that people were abandoning postal savings. He said it was possible that some funds were shifting from post offices to banks which he said was not a bad thing.