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CHIT MANIA

West Bengal is a champion small saver. Its small savings were the highest amongst all states in 2011-12; even such rich states as Maharashtra and Gujarat trailed behind. But even the champion is slowing down; people have been taking more out of their small savings accounts than they have been putting in. That does not show small savings development officers in a good light; it would seem that they have been sleeping on their jobs. They would naturally deny such indulgence. They believe they are overworked. They allege there are hundreds of vacancies in their department, which they want the government to fill up forthwith. And they have blamed chit funds for their plight. Chit funds must by definition must be illegal; the SSDOs want district officers to list them forthwith and close them down.

They are not the only ones with a distaste for chit funds; the Reserve Bank of India is also not fond of them, and has made a host of regulations to harass them. In spite of that, they continue to do well. That may look like a good reason to ban them; but there are other people in the Union of India. People in south India, especially Kerala, are particularly fond of chit funds; so it is not possible for the government to ban them on the demand of West Bengalís small savings development officers. But they can take solace in the fact that collections of small savings have shrunk all over India. People have found other, more paying investments. In particular, banks are now giving 8.5 per cent on deposits of five years; when compounded, the yield goes up to 8.7 per cent. There are small savings instruments which yield about that much; but they no longer have an advantage over bank deposits. So people let their savings accumulate in banks. It is surprising that the small savings development officers have not blamed banks, and their grandmother the RBI which has permitted them to offer such predatory interest rates; maybe they think that chit funds, being private sector, are fair game, whereas banks are family members. But even within the government family, small savings are outdated dinosaurs. There was a time when the Central government was indigent and borrowed from small fellows for five or 10 years. But just now, private industry is in a downturn, banks do not have enough clients, and they are happy to lend the government as much as it likes.

The West Bengal governmentís problem is a bit different; it is in debt up to its ears, and anyone who chooses to lend to it must be mad. But altogether, the situation is rather hopeless for small savings. That need not worry small savings development officers. They can continue to drink their normal ration of tea, for their jobs are in no danger. But paranoia is not the answer.