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Consider the following statements regarding small savings instruments:
- These are managed by the central government of India with a sovereign guarantee.
- The deposits collected through these instruments are pooled in the consolidated fund of India.
Which of the statements given above is/are correct?
- a)1 only
- b)2 only
- c)Both 1 and 2
- d)Neither 1 nor 2
Correct answer is option 'A'. Can you explain this answer?
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Consider the following statements regarding small savings instruments:...
The government of India has raised the rates offered for most small savings instruments (SSIs) in the range of 40 basis points (bps) to 150 bps over the last five quarters.
- These are a set of savings instruments managed by the central government with an aim to encourage citizens to save regularly irrespective of their age.
- Features
- They provide returns that are generally higher than bank fixed deposits.
- Also gives a sovereign guarantee and tax benefits.
- The interest rates on small savings schemes on a quarterly basis.
- All deposits received under various small savings schemes are pooled in the National Small Savings Fund.
- These instruments can be classified under three heads:
- Postal deposits (comprising savings account, recurring deposits, time deposits of varying maturities and monthly income scheme(MIS);
- Savings certificates (National Small Savings Certificate VIII (NSC) and Kisan Vikas Patra (KVP)];
- Social security schemes [(public provident fund (PPF) and Senior Citizens‘ Savings Scheme(SCSS)]
- The money in the fund is used by the central government to finance its fiscal deficit.
Hence only statement 1 is correct.
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Consider the following statements regarding small savings instruments:...
Explanation:
Statement 1: These small savings instruments are managed by the central government of India with a sovereign guarantee.
This statement is correct. Small savings instruments like Public Provident Fund (PPF), National Savings Certificates (NSC), Kisan Vikas Patra (KVP), etc., are managed by the central government of India. The government provides a sovereign guarantee on these instruments, which means that the principal amount and the interest earned on them are guaranteed by the government.
Statement 2: The deposits collected through these instruments are pooled in the consolidated fund of India.
This statement is incorrect. The deposits collected through small savings instruments are not pooled in the consolidated fund of India. Instead, they are utilized by the government for various developmental and welfare programs. The funds collected through these instruments are used for infrastructure development, funding of social welfare schemes, and financing the fiscal deficit of the government.
The consolidated fund of India is a fund to which all revenues received by the government, including taxes, fees, and other receipts, are credited. It is used to meet the ordinary expenses of the government, such as payment of salaries, pensions, and interest on loans. The small savings deposits are not part of this fund.
Therefore, only statement 1 is correct.
Statement 1: These small savings instruments are managed by the central government of India with a sovereign guarantee.
This statement is correct. Small savings instruments like Public Provident Fund (PPF), National Savings Certificates (NSC), Kisan Vikas Patra (KVP), etc., are managed by the central government of India. The government provides a sovereign guarantee on these instruments, which means that the principal amount and the interest earned on them are guaranteed by the government.
Statement 2: The deposits collected through these instruments are pooled in the consolidated fund of India.
This statement is incorrect. The deposits collected through small savings instruments are not pooled in the consolidated fund of India. Instead, they are utilized by the government for various developmental and welfare programs. The funds collected through these instruments are used for infrastructure development, funding of social welfare schemes, and financing the fiscal deficit of the government.
The consolidated fund of India is a fund to which all revenues received by the government, including taxes, fees, and other receipts, are credited. It is used to meet the ordinary expenses of the government, such as payment of salaries, pensions, and interest on loans. The small savings deposits are not part of this fund.
Therefore, only statement 1 is correct.
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