The panel, to be headed by RBI deputy governor Shymala Gopinath, will review the structure of the National Small Savings Fund and give recommendations on making schemes more flexible and market-linked
The government has set up a committee to look into deregulating interest rates on small savings instruments such as public provident fund schemes, a move aimed at linking them to market rates, reports PTI.
The panel, to be headed by Reserve Bank of India (RBI) deputy governor Shymala Gopinath, will review the structure of the National Small Savings Fund (NSSF) and give recommendations on making schemes more flexible and market-linked.
The committee, suggested by the 13th Finance Commission, will also review the existing terms of loans extended by the NSSF to the Centre and states and recommend changes required in lending arrangements.
Other investment opportunities for the collections, from small savings and repayment proceeds of NSSF loans extended to states and the central government, will also be monitored.
Interest on various small savings schemes such as Public Provident Fund (PPF) and the Post Office Monthly Income Scheme are administered by the Centre, and currently stands at 8% on five to seven years' maturity, slightly higher than fixed term deposits of banks of comparable tenure.
The Centre gives each state a part of the amount raised through small savings as a 25-year loan carrying 9.5% interest. However, there is a moratorium of five years on the principal amount.
The Finance Commission, headed by former finance secretary Vijay Kelkar, said that when interest rates on loans from these schemes are higher than market rates, it causes an increase in subscription to these instruments — thereby increasing the flow of loans to states.
With overall borrowings capped by Fiscal Responsibility and Budget Management (FRBM) targets, the states cannot take recourse to open market borrowings. Thus, states may not be able to benefit from lower interest rates even if market rates go down as they are saddled with high inflows from high-cost loans derived from small savings.
States are allowed to go for market borrowings only till the fiscal deficit widens to 4% of the gross domestic product (GDP).
States have also raised concerns on the tenure of the loan. There is significant mismatch between the maturity period of five to seven years for most small savings instruments and the 25-year tenure of loans extended through these schemes.
Further, the statement said that administrative arrangements like the cost of operation and incentives offered on small savings investments by states will also be looked into.
Other members of the committee include senior officials in the finance ministry, principal secretary (finance), government of Maharashtra; principal secretary (finance), government of West Bengal; Indian Council for Research on International Economic Relations (ICRIER) director and CEO Rajiv Kumar and Corporation Bank CMD JM Garg.
Mumbai-based IL&FS Transportation Networks Ltd said its Spain-based unit Elsamex SA and Portugal-based unit, Intevial Gestao Integral Rodoviaria SA (Intevial Portugal) in a consortium with local firms has emerged as the preferred bidder for maintenance of six roads contracts in various states in Portugal for three years.
The estimated total contract value is worth about Rs338.84 crore and the share of Elsamex SA and Intevial Portugal is Rs259.31 crore.
On Tuesday, IL&FS Transportation shares closed 1% higher at Rs307 on the Bombay Stock Exchange, while the Sensex ended at 0.3% up at 17,985 points.
Bangalore-based Subex Ltd, operations and business support systems provider, said it has won multi-million dollar contract from the European CSP to implement ROC platform for interconnect billing and fraud management.
This multi-million dollar contract is for three years and covers six countries. Subex will provide its ROC interconnect billing and fraud management solutions to the service provider through managed services, it said in a regulatory filing.
On Tuesday, Subex shares gained 4% up at Rs57 on the Bombay Stock Exchange, while the Sensex ended at 0.3% up at 17,985 points.