National Saving Schemes: Finance fears institutional investment to be withdrawn on maturity

Economic Co-ordination Committee (ECC) has reportedly restored institutional investment in National Saving Schemes (NSSs) just one year after its suspension to enable it to secure Rs 150 billion, which the Finance Ministry fears would be withdrawn on maturity.
The NSSs play a vital role in mobilising domestic savings, which also provide budgetary support as non-bank financing. The portfolio of the NSSs reached Rs 1931 billion as on December 31, 2011, with a clientele of 6 million. Institutional investment like registered charities, public sector enterprises (excluding banks), private educational & health institutions, Employees Old Age Benefit Institution, private corporations and non-bank financial institutions (excluding insurance companies) were allowed to invest in NSSs with effect from 30th September, 2006.
The institutional investment in NSSs, except in certain categories of individual funds, was proposed to be discontinued, and a summary was submitted to the Prime Minister in March, 2011. The Prime Minister directed that the matter should be tabled before the ECC. Accordingly the case was considered by ECC in its meeting on April 11, 2011 and it was decided that all institutional investment in NSSs may be discontinued with effect from March 31, 2011.
Official documents obtained from the Finance Ministry, reveal that the Economic Co-ordination Committee (ECC) of the Cabinet was informed on April 6, 2012 that the prohibition placed on all institutional investments in NSSs has not only undermined flow of funds into NSSs along with the target of NSSs receipts fixed for the current fiscal year 2011-12, but it is also expected to lead to huge withdrawals from NSSs of around Rs 150.0 billion on maturity, of institutional investments which will ultimately be shifted to the banking sector.
This, in turn, will increase the dependency of the government on bank borrowing, which will lead to inflationary pressures, crowding-out private sector, and macroeconomic imbalances. The Finance Ministry, therefore, requested that the ECC decision of April 11, 2011 may be reviewed and institutional investment be allowed in the NSSs in case of individual funds such as pension, gratuity, superannuation, contributory provident funds and trusts etc.