Definition
Small Savings Schemes
Small savings schemes are government-backed savings instruments such as PPF, NSC and Sukanya Samriddhi that channel household savings into the Public Account.
Instruments like the Public Provident Fund, National Savings Certificate, Senior Citizens' Savings Scheme and Sukanya Samriddhi offer sovereign-backed returns and, in several cases, tax benefits. Their interest rates are reset periodically by the government with reference to comparable G-sec yields.
Collections flow into the Public Account of India through the National Small Savings Fund, which then lends to the Centre and states. For the government, small savings are an alternative to market borrowing; for households, they are a low-risk savings avenue with administered rates.
Related terms
- Market Borrowing (Dated Securities)Market borrowing is the money the government raises by issuing dated securities — long-term bonds — to investors to finance its fiscal deficit.
- Government Securities (G-Sec)Government securities are tradable debt instruments issued by the central or state governments, considered virtually free of credit risk in rupee terms.
- Public Account of IndiaThe Public Account of India holds money where the government acts as a banker or trustee, such as provident funds and small savings, which it must eventually repay.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.