Sept withdrawals push PPF deposits into red

Surabhi, Sunny Verma
Posted: Friday, Nov 07, 2008 at 0151 hrs IST
Updated: Friday, Nov 07, 2008 at 0151 hrs IST

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New Delhi, Nov 6: PPF rate, they have asked for a switch. Throughout 2008-09, the Centre is also raising money at less than 8% on its bonds—the benchmark ten-year 2018 paper has a coupon rate of just 8.24% with the yields at 7.71% as on November 6.

The rapid intra-year parking and withdrawal from the PPF means the fund has possibly lost its role as a long-term investment avenue. For instance, April saw a combination of high inflation and poor market conditions, a record Rs 5,051.49 crore was invested into the fund. This was unusual, as April, according to CGA data, has always seen huge redemptions. In 2006-07, Rs 2,313.57 crore was withdrawn from the fund in April.

The finance ministry estimates total deposits in PPF to exceed Rs 12,200 crore for 2008-09, in sharp contrast to last fiscal, when total collections in the fund was half of that at Rs 6,329 crore.

Other government-backed small saving schemes such as the Post Office Savings Account, National Savings Certificates and Kisan Vikas Patra have already been losing investors. Up to September, such schemes registered a net outflow of Rs 3,083.62 crore. With a similar lacklustre performance last fiscal, the full-year target of Rs 41,100 crore was not met. The Budget estimate for 2008-09 was scaled down to Rs 17,800 crore.

The slump in investor interest in such schemes is despite the fact that the government has introduced added incentives. The five-year post office time deposits and Senior Citizens’ Saving Scheme, for instance, has now been included under Section 80C for tax exemption. Similarly, the government has also announced a 5% bonus on the Post Office Monthly Income Scheme. ...

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