The Senior Citizens Savings Scheme (SCSS) saw a huge inflow in the first half of the financial year 2023-24, collecting in excess of Rs 1 lakh crore from subscribers. The scheme, which is only for senior citizens, has been popular in the past, but this year, the SCSS collection has grown spectacularly. One reason for this could be due to the changes made in Budget 2023 for the scheme, where the deposit limit was increased from Rs 15 lakh to Rs 30 lakh.

Incidentally, the scheme offers an attractive rate of interest to senior citizens, which is reviewed every quarter. Another reason for the overwhelming popularity of the scheme is the minimum amount of Rs. 1,000 that one has to make to open a SCSS account. The minimum investment is Rs 1,000 and in multiple thereof, with the maximum balance in the account limited to the limit defined.

Incidentally, the rate of interest was increased to 8.2 per cent for the first quarter of FY24, from 8 per cent in the January-March quarter of FY 2023. After the latest revision, the rate for SCSS bounced back to the 8.2 per cent rate that the scheme offered in the October-December quarter of FY 2023.

Another reason for the increase in popularity of SCSS could be because of the tax benefits under section 80C of the Income-tax Act, 1961 for an investment amount of up to Rs 1.5 lakh per year. Additionally, the scheme offers flexibility of extending the deposit tenure. It can be initially opened for five years and can be extended for another three years. In the event of an emergency, one can even close the account prematurely after paying a penalty, which is usually 1-1.5 per cent.

The money collected in SCSS from the depositors is directed to the National Small Savings Fund (NSSF), which the government uses for financing the fiscal deficit and for investing in government securities.

Established in 1999, NSSF is a fund body that pools money from various small savings schemes, such as SCSS, Mahila Samman Savings Certificate, National Savings Certificate, etc. This fund body comes under the Ministry of Finance.

According to a report in the Economic Times, the government aims to use funds from NSSF, which is estimated at Rs 17.87 lakh crore to finance the fiscal deficit. The government aims to budget Rs 4.71 lakh crore from the NSSF in the financial year FY 2024. This budgeted amount is, reportedly, an increase over the Rs 4.30 lakh crore that was estimated in the previous financial year, FY 2023.

The high inflow in NSSF would help the government in reducing the pressure of borrowing from the market which is costing more to the government due to a hike in policy rates of 2.50 per cent by the Reserve Bank of India (RBI), and rising yields.