What is National Small Savings Fund?

Small Savings Schemes have always been popular among Indian households. Not only these schemes allow the people to invest their money for high yields, they help the government in channelizing their money towards itself so that it can use it for fulfilling its financing requirements.

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All the Small Savings Schemes can be broadly classified into three categories:

• Social Security Schemes such as Senior Citizens’ Savings Scheme (SCSS), Sukanya Samriddhi Account, or Public Provident Fund (PPF)
• Postal Deposits such as savings account, recurring deposit account, post office monthly account, post office time deposits, etc.
• Savings Certificates such as Kisan Vikas Patra or National Small Savings Scheme (NSC)

National Small Savings Fund (NSSF)

In 1999, The government decided to combine all the funds obtained from different Small Savings Schemes (as given above) to fill the budgetary demands. And so, the National Small Savings Fund (NSSF) was created.

Funds from all the Small Savings Schemes are credited to NSSF and even withdrawals by the investors are made out of this fund. Both the central government and state governments use the NSSF balance for investing in government securities.

The following are some of the most important points to know about NSSF and Small Savings Schemes:

• Small Savings Schemes help the government to meet its social security goals, which is why the government offers high-interest rates on these schemes such as PPF, Senior Citizens Savings Fund, etc.
• The NSSF is actively regulated and administered by the Government of India as well as the Ministry of Finance.
• NSSF is operated in a public account which is why the transactions don’t affect the fiscal deficit of the Central government- at least not directly.

All states, save for Kerala, Delhi, Arunachal Pradesh, and Madhya Pradesh, are exempted from the use of the money collected in the NSSF as per the recommendations of the Fourteenth Finance Commission. This was based on the reasoning that the states usually get loans on smaller interest rates.