The RBI (Reserve Bank of India) annual report for the financial year 2017-18 released in the last week on August, showed that the rate of growth in small savings schemes was almost nil for the period under review. The data on Indian household savings towards various financial assets showed that no fresh investments were made in small savings schemes like public provident fund (PPF), NPS (National Pension Scheme) or other post office schemes for the year.

However, the report also showed that gross financial savings had touched 11.9 percent in 2017-18 from 9.1 percent in 2016-17, while the contribution from savings dipped from 0.4 percent to nil. Experts suggest that this is primarily due to the fall in interest rates on the schemes while the Indian markets were breaking new records in the year 2017.

Traditionally, Indian households preferably chose bank deposits, which they later moved from due to tax implications and lower interest returns. The shift was gradually made towards small savings schemes which have also seen a fall in 2017-18, primarily due to the unchanged interest rates. Many equity and mutual fund investments, on the other hand, yielded more than 8 percent in annual returns.

The trend in 2018-19, however, could change because the once attractive tax-free long-term investment in equity is now being charged at the rate of 10 percent on any profits (capital gains) made over Rs 1 lakh. Additionally, there have been two consecutive hikes in repo rates in RBI's monetary policy meets, which will mean that interest rates on bank deposits and small savings schemes could be higher this time.