The Thirteenth Finance Commission, in its report has made recommendations to provide debt relief to States, in which the Commission inter alia recommended that the interest rate on loans contracted by the States till 2006-07 and outstanding at the end of 2009-10 be reset at a common interest rate of 9% in place of the existing rates of 10.5% or 9.5%. The Commission has also recommended that all aspects of the design and administration of the National Small Savings Fund (NSSF) be examined with the aim of bringing transparency, market linked rates and other much needed reforms to the scheme.
The Government had in principle accepted the recommendations of the Thirteenth Finance Commission. The Government had also decided to set up a Committee for comprehensive review of the NSSF structure, interest rate, tenor and other administrative matters. Accordingly, a Committee headed by Smt. Shyamla Gopinath, Deputy Governor, Reserve Bank of India, has been set up on 8.7.2010. Other members of the Committee are Joint Secretary (Budget), Ministry of Finance; Economic Adviser, Ministry of Finance, DEA; Principal Secretary (Finance), Govt. of Maharashtra; Principal Secretary (Finance), Govt. of West Bengal; Dr. Rajiv Kumar, Director & Chief Executive, Indian Council for Research on International Economic Relations (ICRIER); and Shri J.M. Garg, Chairman and Managing Director, Corporation Bank.
The terms of reference of the Committee, inter alia, include review of the existing parameters for the small saving schemes in operation and recommend mechanisms to make them more flexible and market linked; review of the existing terms of the loans extended from the NSSF to the Centre and States and recommend on the changes required in the arrangement of lending the net collection of small savings to Centre and States; review of the other possible investment opportunities for the net collections from small savings and the repayment proceeds of NSSF loans extended to States and Centre; review of the administrative arrangement including the cost of operation; and review of the incentives offered on the small savings investments by the States. While making its recommendations, the Committee is expected to consider the importance of small savings within the overall savings in the economy especially its contribution in promoting savings amongst small investors and need of NSSF to be a viable fund.
Government of India
Ministry of Finance
Department of Economic Affairs
Dated July 13, 2010
