Calcutta, Sept. 5: The state government today unveiled its plans to take financial inclusion to the people of Bengal by floating a savings scheme to protect investors from illegal deposit-mobilising companies and offer returns comparable with banks.
“People will have a safe scheme to deposit their money once it is launched on October 5. It will be like a fixed deposit scheme. People can invest money for one to five years,” Mamata Banerjee said while laying down the scheme’s details.
The Safe Savings Scheme (3S) will be operated in collaboration with four nationalised banks — the State Bank of India, Allahabad Bank, UCO Bank and the United Bank of India.
Sources in the finance department said a model had been worked out on how to mobilise deposits by using small saving agents, who sell post office and bank schemes, and return the money on maturity. The rate of interest on the fixed deposits, the chief minister said, will depend on the tenure, as is the case with banks.
On May 9, immediately after the collapse of the Saradha Group, Mamata had announced that her government was working on a social security scheme to ensure that rural people got a safe saving option.
Although today’s announcement is a bit different from what Mamata had hinted earlier as banks will mobilise deposits and refund the money on maturity, the scheme may address the problem of poor penetration of banks in rural Bengal, often cited as the reason behind the mushrooming of “chit funds”.
According to the department of financial services under the Union finance ministry, 48.5 per cent of Bengal’s population has access to banking, which is below the all-India average of 58.7 per cent, as on September 2012.
Data available with the state finance department reveal that around 8,000 to 10,000 villages in Bengal don’t have any bank.
“Two hundred bank branches will be opened shortly to help people deposit their money with the government through the banks,” Mamata said.
This is not the first time a state government will roll out a deposit scheme through nationalised banks. The Kerala government also runs a deposit scheme, but it is different from that Bengal announced today.
“The state treasury (in Kerala) accepts deposits from the public…. By launching the scheme, the treasury was allowing people a safe savings option. For the government, it has helped tackle liquidity problems,” said Prabhat Patnaik, former vice-chairman of the Kerala planning board and professor of economics, JNU.
Funds mobilised through the treasury, however, did not allow the Kerala government to use it for its plan and non-plan expenditure. The state has been under pressure from the Centre to discontinue the scheme.
Sources in the Bengal finance department said the Kerala model was considered before the scheme was planned and the decision to tie up with banks was taken to avoid any regulatory hassle.
An official said the government might consider adding some extra benefits such as accidental death coverage to make the scheme popular.
Although the success of 3S will depend on the extent of the banking network, some officials said even a partial fulfilment of the objective of having more banks would be beneficial as villagers who have to depend on money lenders will have access to cheaper loans.
“An individual can deposit amounts between Rs 1,000 to Rs 1 lakh…. There will be a lock-in period of three months after which an investors can withdraw his/her money,” the chief minister said, adding that in case of a family, the ceiling would go up to Rs 5 lakh.
A finance department official said Mamata had spoken of annual deposit limits.
An official said: “This is a political masterstroke… If it’s a success, the credit will go to her. If it fails, she can pass the buck onto the Centre for not allowing banks to open branches in rural Bengal.”
When the chief minister was asked the difference between the 3S Scheme and normal fixed deposit schemes run by public sector banks, she handed the microphone to finance minister Amit Mitra.
“The biggest difference is the sovereign guarantee of the state government…. This will help build depositor confidence,” Mitra said.
According to Reserve Bank of India rules, adequate capitalisation of banks is a must to ensure solvency of banks and safety of public money. When there was a run on the private sector Global Trust Bank in 2004, the public sector Oriental Commerce of Bank took it over and not a single depositor lost money.
As the major shareholder of all the four banks mandated by the Bengal government for the 3S scheme is the Centre, any deposit, in a way, carries sovereign guarantee already.
“Moreover, deposits up to Rs 1 lakh are insured by the Deposit Insurance and Credit Guarantee Corporation, a wholly owned subsidiary of the RBI and created by an act of Parliament,” a senior banker said.