BANKING TRADE AND COMMERCE

SMALL SAVINGS

Small Savings.—Small savings is one of the measures for raising money by borrowing internally to finance the development plans of the country. These investments help the nation in the defence and development of the country. Thus small savings scheme is a scheme of national benefit as well as personal benefit to the investor in all respects. In a nut-shell it may be said that " small savings is the safety valve and sheet anchor of the State's sources of supply for its plans to keep going; for its people to keep progressing to prosperity; for the nation to ensure its defence and fulfil its destiny ".

The small savings movement was started in India in 1945 with the intention of mopping up purchasing power to fight the inflationary forces in post war years. The Planning Commission later adopted it as an important means to finance its expenditure on capital schemes included in the five year plans.

The following categories of investments have been classified as small savings investments:—

(1) 12-year national plan savings certificates, issued from 1st June 1957 including past holdings of 12-years and 7-years national savings certificates as well as 10-year national plan certificates issued before June 1957.

(2) Post office savings banks.

(3) 10-year treasury savings deposit certificates issued from 1st June 1957 including past holdings of treasury deposit certificates issued before that date.

(4) 15-year annuity certificates.

(5) Cumulative time deposit scheme.

12-Year National Plan Savings Certificates : The Government discontinued the 7-year and 12-year national savings certificates and 10-year national plan certificates and issued the 12-year national plan savings certificates with effect from June 1957. These certificates are available at all postal savings banks in the denominations of from Rs. 5 to Rs. 5,000. They yield an income-tax free simple interest of 5.41 per cent and compound interest of 4.25 per cent at maturity, i.e., at the end of twelve years. Before and after the period of non-encash-ability, any certificate can be transferred as security to (1) Government Gazetted Officer; (2) Reserve Bank or Scheduled Bank, or Co-operative Society or Co-operative Bank; (3) Corporation or a Government company; (4) Local Authority.

Post Office Savings Bank: The post office savings banks constitute an important source for the collection of small savings, especially from people of small means. The agency of post office savings banks is well suited to the rural areas where there are meagre banking facilities. Moreover, as an agency of the Government, they enjoy complete confidence of the people. Keeping savings banks accounts constitutes one of the functions of the post offices and can. therefore, be carried on economically.

The post office savings scheme is one in which even the poorest can participate. A person can open his account with Rs. 2 at any post office which does savings bank work. An account may be opened by an individual himself or by two persons jointly. Interest allowed for this deposit on individual and joint account is 2^l/2 per cent on the sum exceeding this amount. The maximum amount that can be deposited is Rs. 15,000 in case of an individual and Rs. 30,000 in case of joint account. Non-profit making institutions and co-operative societies derive the same facilities which are enjoyed by individuals from post office savings banks. There are no limits to the amount of investments by such institutions in the public account at post offices. It is desirable in national interest that all non-profit making institutions keep their surplus funds in the post office savings banks. The commanding officer of a Unit, District Superintendent of Police, Chairman or President of District Board or Municipality may open a single account, called the "conjoint account" on behalf of employees under them. In all these cases withdrawals are permissible twice a week.

10 Year Savings Scheme: Of the important small savings schemes the 10-year savings deposit scheme is one. It was started in 1957. Originally the deposits were to be multiples of Rs. 100 only with a ceiling on the maximum amount that may be invested, the ceiling varying according to the nature of the holders. From January 1958, deposits have been accepted in multiples of Rs. 50 only. These were available at the Reserve Bank of India, branches of the State Bank of India doing treasury work and all treasuries and sub-treasuries. The deposits are repayable at par value on the expiry of ten calendar years from the date of deposit and till June 1967; the rate of interest allowed on them was 3^l/2 per cent per annum. The same was raised to 4% from the said date. Interest is paid annually on the completion of each period of twelve calendar months from the date of deposit. No interest is allowed for any period of less than a year. At the option of the depositors, the deposits are refundable at any time after the expiry of one year after deducting a discount at a graded rate, the latter decreasing as the maturity approaches. The interest earned is not liable to income-tax. The certificates can be pledged with the scheduled banks to secure advances against them thus enabling the small savers to tide over temporary difficulty without encashing them prematurely.

15-Year Annuity Certificates: These certificates have been issued since 2nd January 1958, and are sold in multiples of Rs. 1,330 up to RS. 26,600 and yield the amount together with compound interest of approximately 4.25 per cent every year by way of monthly payments, spread over 15 Years. If the investor dies during the period, the amount may be paid to his legal heir. Jointly one could invest up to Rs. 53,200. These certificates are also available at such places where treasury savings deposit certificates are sold.

Cumulative Time Deposit Scheme: The scheme is very simple, flexible and suits everyone's needs. Under this scheme people can deposit every month Rs. 5; 10; 20; 100; 200 or 300 at a post office for a period of 5; 10 or 15 years. At the end of the period it brings a handsome lumpsum to the investor. The return is free of income tax. The interest at maturity works out to about 3.3 per cent per annum compound on a five year account, 3.8 per cent per annum compound on a ten year account and 4.3 per cent per annum compound on a 15-year account.

The account can be opened at any Post office transacting savings banks business and operated by an adult or two adults jointly. An account can be opened also by a minor in his own name or by a guardian on behalf of the minor, in which case the guardian can operate the account. Cumulative time deposit can be transferred from one post office to another at any time.

In the following table is given the collections and withdrawals in respect of the various categories of certificates in the district for the period from 1964-65 to 1965-66:—

TABLE No. 8

COLLECTIONS AND WITHDRAWALS OF SMALL SAVINGS IN BULDHANA DISTRICT DURING 1964-65 AND 1965-66.

(Figures in Rs.)

TABLE No. 8—contd.

* SOURCE.—Socio-Economic Review and District Statistical Abstract of Buldhana District, 1965-66.

** The target for collection of Small Savings in the district during 1972-73 was Rs.81 lakhs. The gross collection amounted to Rs. 28 Crores while the withdrawals amounted to Rs. 22 Crores, the net collection amounting to Rs. 6 Crores.

Insurance.—With the nationalisation of life insurance business the Life Insurance Corporation became the sole organisation doing life insurance business in India. The Corporation was constituted under the Life Insurance Corporation Act of 1956 and was established on 1st September 1956. From this date all Indian insurers and provident fund societies as also foreign insurers ceased to carry on life insurance business anywhere in India. However, general insurance which included fire, marine, accident and other insurance business is kept open to private enterprise. [ General insurance was also subsequently nationalised.] Most of the former insurance companies and societies which used to transact all insurance business including life, have now switched over to general insurance.

Under the new organisational and administrative set up of the Corporation, Buldhana district is placed under the territorial jurisdiction of Nagpur Division of the western zone together with Akola, Amravati, Bhandara, Chandrapur, Wardha and Yeotmal districts.

The number of insurance policies issued and amount insured and number of agents in Buldhana District during the years from 1962-63 to 1968-69 are given in the following statement:—

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