Post offices hold 82% of total small savings deposit, banks only 18%: State Bank of India report

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If you are a middle-class person and go for small savings, chances are more that you rush to the good old post offices than to the swanky banks or reach for their website or cellphone application. The fuddy-duddy post office is standing like a Godzilla in the small savings market even in this age of modern banking, a report of the State Bank of India (SBI) has revealed.

A study by SBI released last week revealed that post offices virtually monopolize the small savings space in the country accounting for as much as 82% of the deposits, while banks account for the rest 18%. According to the data compiled by SBI, in FY18 of the total small savings kitty of Rs 5.96 lakh crore in the country, Rs 1.08 lakh crore is with the banks and Rs 4.88 lakh crore is with post offices.

“It is mainly because the interest rate in post offices is still a bit higher than what the banks offer. After the financial crisis in 2008, there has been a significant jump in preference for post office schemes. This jump is maximum in low-income states like West Bengal and even in high incomer states like Maharashtra. There are only a few states such as Gujarat, Rajasthan, and Andhra Pradesh where the share has continued to decline,” mentioned the report.

The interest rates of small savings schemes have remained untouched since April 2020. Though the Centre announced a drastic cut on March 31, 2021, the finance minister announced a rollback the next morning.

The popular schemes of the post office and their current rates of interest are: Savings Account (4%), PPF (7.1%), 5-year RD (5.8%), 1-3 year-FD (5.5%), 5-year FD (6.7%), Senior Citizen Savings Scheme (7.4%), Monthly Income Scheme (6.6%), KVP (6.9%), NSC (6.8%) and Sukanya Samriddhi Yojana (7.6%).

Maharashtra mopped up Rs 25,088 crore of bank deposits in FY18. West Bengal and Delhi occupied the second and third positions respectively accounting for Rs 12,295 crore and Rs 11,870 crore. Uttar Pradesh (Rs 9,505 crore) and Gujarat (Rs 9,451 crore) were in the fourth and fifth positions.

But Bengal mopped up Rs 77,699 crore in post office deposits and occupied the first place. Uttar Pradesh with Rs 60,156 crore and Gujarat with Rs 39,193 crore stood at second and third respectively. Maharashtra (Rs 37,937 cr) stood at fourth place. Tamil Nadu was at number five with Rs 25,796 crore.

To analyze the trend of small savings in India, we looked at the latest available state-wise gross small savings collections data are of FY18. The data indicate that top five states accounted for 50% of total gross collections with West Bengal and Uttar Pradesh leading the league,” read the report.