Are PPF, SCSS, Sukanya Samriddhi Still Worthwhile? - Moneylife

Are PPF, SCSS, Sukanya Samriddhi Still Worthwhile? - Moneylife


There is an urgent need to have a re-look at the approach of GOI to small savings major portion of which form part of retirement savings of self-employed people and senior citizens. It is unfortunate that different pressure groups argue for reducing
rate of return on savings from different angles and GOI succumb to such
pressures without weighing the impact on social security cover for which savers
invest in most of the long term savings instruments like PPF and various
savings options offered under National Savings Schemes. The combined corpus
under such schemes constitute less than 10 per cent of the deposits with banks.
Beyond tax savings, investors under these schemes look at their stable nature in regard to security of investments and regular assured returns. Considering their role in providing financial security for elders and acting as a source of liquidity when earnings
fluctuate in the present uncertain employment market, there is a strong case
for ensuring a rate of return on such investments, higher than that available
on bank deposits. The recent SBI research report suggestion to consider  differential (higher) rates for savings in the accounts of elders and in age-groups above 45 years is worth looking at. Another group which may deserve differential treatment may be those who are not investing in these instruments for income tax benefit (their income being low and therefore not taxable).
A related issue is professionalism in management of funds flowing into governments’ kitty which now come from captive sources like LIC, EPFO, banks(SLR deposits), National Savings Schemes and PPF. As these funds are used by government and no
investment risk prevalent in money with the banking system is to be factored
in, it is natural that savers expect a higher rate of return on investment in
such financial instruments. Any thought of relating interest rates on
investments in such instruments with bank interests is irrational and therefore
M G Warrier, Mumbai


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