RBI deputy governor heads panel to review interest rates on small savings

The government has set up a committee to undertake a comprehensive review of the National Small Savings Fund (NSSF) structure, including interest rate, tenor and other administrative matters. The committee is headed by Shyamala Gopinath, deputy governor of the Reserve Bank of India (RBI). 

The committee has been set up on the recommendations of the Thirteenth Finance Commission. In its report, the commission, set up to provide debt relief to states, inter alia recommended that the interest rate on loans contracted by the states till 2006-07 and outstanding at the end of 2009-10 be reset at a common interest rate of 9 per cent in place of the existing rates of 10.5 per cent or 9.5 per cent.

The commission has also recommended that all aspects of the design and administration of the National Small Savings Fund (NSSF) be examined with the aim of bringing transparency, market-linked rates and other much needed reforms to the scheme.

The committee is expected to:

Review the existing parameters of the small saving schemes in operation and recommend mechanisms to make them more flexible and market linked;

Review the existing terms of loans extended from the NSSF to the centre and states and recommend the changes required in the arrangement of lending the net collection of small savings to the centre and states;