Small savings continued their unabated rise in the first half of the current fiscal despite a 100 basis points cut in the interest rate offered by these instruments in Budget 2003.

The gross collections during April-September 2003 have shot up 28 per cent to Rs 64,799 crore (Rs 647.99 billion) compared to Rs 50,674 crore (Rs 506.74 billion) realised during the corresponding period last fiscal.

The net small savings collections were, however, higher by only 21 per cent at Rs 29,538 crore (Rs 295.38 billion) compared to Rs 24,412 crore (Rs 244.12 billion) during the first half of the last fiscal.

The growth has been phenomenal given the fact that the finance ministry has estimated net small savings to grow by just 11 per cent during the full year.

Much of the growth has been driven by savings deposit schemes with the post office. The composition of the small savings shows that gross collections from such schemes stood at Rs 40,811 crore (Rs 408.11 billion), accounting for almost 63 per cent of the total small savings mop-up.  The net accretion was, however, only Rs 20,216 crore (Rs 202.16 billion), with withdrawals of Rs 20,595 crore (Rs 205.95 billion).

The gross collections from savings certificates stood at Rs 15,542 crore (Rs 155.42 billion) during the first six months accounting for 24 per cent of the total small savings collections. The gross realisation from public provident funds was Rs 8,168 crore (Rs 81.68 billion) with withdrawals of Rs 2,979 crore (Rs 29.79 billion) from the funds during the first half.

While the small savings funds are passed on 100 per cent to states after deduction of the withdrawals, the entire liability of the scheme rests with the Centre.

For states, it is easy money since all other borrowings require the finance ministry's permission. In the last few years, the small savings accretion has seen a surge.

As pointed out by the finance minister, high real rates of return still make the schemes one of the most popular investment avenues for retail investors. The real rates, adjusted for inflation, are still a remunerative 6.3 per cent a year, higher than what they were between 1991-92 and 1995-96.