Why has this measure whereby interest rates on small savings have been cut by 0.5 percent to 1 percent, evoked adverse reaction from the common people? By now they are aware of the securities and other financial scams and dare not invest their life, savings in banks or in company bonds but are prepared to get a guaranteed return from the post offices, which are run by government departments. Expansions of bank branches in rural areas have also not been adequate but the post offices are available in far-flung areas.

There is no gainsaying that the States generally not receiving a liberal dose of funds for development schemes from the centre often have to fall back upon the small savings amount for implementation of schemes benefiting the people. The prospective depositors may now be forced to or allured into depositing their savings with unscrupulous chit funds, may be on a promise of higher return but will have to rue their decision as Government regulation is not full-proof enough to guarantee the promised income from such investments. But one thing is clear: the Vajpayee government’s decision will discourage the flow of money into small savings schemes in post offices.

The reduction of interest rates for small savings in post offices will be strongly felt in West Bengal. The Left Front Government in the State has sustained a campaign among the urban and rural poor to invest in small savings schemes in the State. The result has been quite unique. For consecutive years, West Bengal has topped the list of States recording the highest collection through these schemes, Maharastra being a distant second. And the State Government has utilized the funds for implementation of the development schemes. On the other hand, the credit deposit ratio of the commercial banks is far below the national average. And the criticism of the people of the banks investing their funds collected in West Bengal in other States is quite pertinent. The nationalized banks all these years have played a key role in other States by investing their surplus funds deposited with them in West Bengal. Criticism of discrimination against the nationalized banks over the years has gone unheeded.

For the post office savings bank account, the interest rate will be reduced to 4.5 per cent. The interest rates on post office time deposits for one, two, three and five years will now be 9 per cent, 10 per cent, 11 per cent, and 11.5 per cent respectively. . Similarly, the rate of interest on post office recurring deposits will be 11.5 per cent. The post office monthly account will now offer 12 per cent interest instead of 13 per cent. The Kisan Vikas Patra and the Indira Vikas Patra will now double in six years instead of five and half a years. The National Savings Certificate VIIIth issue will now offer an interest of 11.5 per cent. Deposit schemes for retired government and PSU employees will be now 9 per cent against 10 per cent. For people who are not government employees and who after having retired from private sector offices have opted for the post office monthly income schemes, hard days are ahead of them. As the price rise will continue unabated, the slashing of small savings interest rate will hit them most. The interest rates on Kisan Vikas Patra and the Indira Vikas Patra have been reduced problay to popularise bonds of finanncial institutions or those floated by industrial houses and the companies rund and managed by them.

The Chief Minister of West Bengal, Jyoti Basu, has urged the Central government to keep in abeyance its decision to reduce interest rates on small savings till the issue is discussed at the Inter State Council meeting. Chief Ministers of all the States is a member of the Council.

In separate letters to the Prime Minister , Atal Behari Vajpayee, Union Finance Minister , Mr Jaswanta Sinha and the Deputy Chairman , Planning Commission , Mr Jaswant Singh on Tuesday Basu said that the Centre has decided to cut interest rates on small savings from January 2 and has directed concerned authorities to stop all transactions on small savings till January 18—the period most suitable for garnering small savings. The States are in the dark as to why the Centre has unilaterally taken such decision. The V.R. Gupta Committee appointed by the Centre in February 1998 went into the issue of small savings. The Committee has submitted its report on interest rates etc to the Centre though of course the West Bengal Government representative had objected to the views expressed by the Committee on interest rates. Unfortunately, the Centre has further lowered the interest rates than the ones recommended by the V. R. Gupta Committee. Basu said the role of small savings were highlighted when Annual Plans of States for 1999-2000 were finalized at meetings with the Planning Commission. Now the States will face difficulty in implementing the Annual Plan because of the unilateral decision of the Centre. Besides, the Union Finance Minister, Mr Jaswanta Sinha at the meeting of the Standing Committee of the Inter-State Council held on December 19, assured the West Bengal Finance Minister, Ashim Dasgupta that there would be further dialogue with the States on the issue. But being oblivious of the assurances made earlier , the Centre has unilaterally decided to cut the interest rates on small savings when the Inter State Council meeting is going to be held very soon , that is, on January 21.

Under the circumstances, Basu requested Mr Vajpayee to keep the implementation of the decision to slash interest rates on small savings in abeyance and that the issue be discussed at the meeting of the inter-State Council.