Mop-up under senior citizens plan quadruples in April-May

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The revamped Senior Citizen Savings Scheme and the new Mahila Samman Savings Certificates plan have fetched bountiful deposits in April-May, signalling to the market that the Centre could reduce its dependence on market borrowing to finance the fiscal deficit in FY24.

The Senior Citizen Savings Scheme, which is currently fetching 8.2% interest per annum, has garnered around Rs 23,000 crore in April-May of the current fiscal, nearly four times the amount of Rs 6,400 crore mobilised in the year-ago period. 

In the Budget for FY24, the Centre has doubled the maximum deposit under the scheme to Rs 30 lakh to generate safe and assured retirement income in old age.

In the newly launched Mahila Samman Savings Certificates scheme, the deposit mobilisation was Rs 3,666 crore in April-May with 0.5 million accounts opened in post offices. 

The scheme, which offers 7.5% annual interest with a maximum ceiling of Rs 2 lakh deposit for a two-year period, will touch new highs when it is made available through public sector banks and four to five private banks later this month, officials reckon.

The Centre has increased its reliance on the National Small Savings Fund (NSSF) to finance its fiscal deficit. The government has budgeted its offtake from the NSSF to rise from Rs 3.96 trillion in FY23 to Rs 4.71 trillion in FY24.

To fund the fiscal deficit of Rs 17.87 trillion in FY24, the government has planned a net borrowing of Rs 12.31 trillion from the market. 

Since the Centre is virtually the sole user of the NSSF deposits to finance the fiscal deficit, any extra receipt could lead to lower market borrowing by the Centre in FY24.

“So, it is a signal to the market that the way the government has planned to finance its fiscal deficit is well on track. The government will not go to market for more borrowings (some thought government won’t be able to mobilise the budgeted amount of small savings),” a senior official told FE.

“So, that gives us faith that we will see consistently lower than a 7% yield on the benchmark 10-year G-sec yield,” the official added. 

India’s 10-year benchmark bond yield traded in a range of 6.96-7.12% over the last month, with a downside bias on yields largely on account of a favourable liquidity landscape, Care Ratings said on Wednesday. 

The 10-year benchmark bond yield dipped below 7% for the first time in over a year on May 5.

“We expect state government borrowings to pick up in the next few months which would act as a counteracting force. The 10-year G-sec yield may not remain decisively below 7%,” rating agency Icra chief economist Aditi Nayar said.


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