These small savings schemes administered by the government through the wide reach of post offices, and some through commercial banks, provide small savers access tax savings instruments that are seen as safe and stable. Whereas they do have some impact in terms of blunting monetary transmission mechanisms, they can perhaps be seen as contributing to overall financial stability.
Benchmarking these administered interest rates to market determined rates has been proposed from time to time. Whereas some rationalisation in schemes has indeed been done, more progress will depend on the emergence of better social security and pension systems, and perhaps easier access to marketable sovereign instruments.