It’s well-intentioned, but should women add a Mahila Samman Certificate to their portfolio?

Mahila Samman Savings Certificate (MSSC) is the second female-only small savings scheme after Sukanya Samriddhi Yojana. (Representative Image: Pixabay)

In order to encourage women to save, Budget 2023 announced a new small savings scheme exclusively for women (and girl children), called Mahila Samman Savings Certificate (MSSC).

A women-only debt product that allows investment up to Rs 2 lakh, it offers a fixed 7.5% interest rate per annum for a fixed tenure of two years, with a partial withdrawal facility. There are no tax benefits for investing nor are the returns tax-free.

This scheme will not be permanently on-tap and will (initially) be available between April 2023 and March 2025.

This is the second female-only small savings scheme after Sukanya Samriddhi Yojana was launched in 2015 as part of the ‘Beti Bachao Beti Padhao’ campaign to encourage parents to invest in their daughters’ education and marriage-related goals and expenses.

But while this is the shortest-tenured small savings scheme, and the 7.5% on offer is only behind SCSS and Sukanya Yojana, does it mean that the Mahila Samman certificate should be part of every women’s savings portfolio?

Need for Mahila Savings Samman Certificate (MSSC)?

Given the tenure of two years, this short-term savings product is at best at par with bank FDs and Post Office time deposits of a similar tenure. And, as per the latest rates, both these offer lower rates than the MSSC.

So, for women looking to park money for just two years, the Mahila Samman Certificate can be looked at as a 1-2 year FD alternative.

But given the upper cap of Rs 2 lakh, that, too, as a one-time investment, this scheme appears to be targeted at women who generally do not park money in formal small savings instruments. In that sense, this is a well-intentioned product that may push such women to adopt this as well as other formal saving and investment instruments in future.

For women earners with a larger surplus and bigger asset base, the small limit of Rs 2 lakh may not be of much use and they can skip it to reduce cluttering their savings and investment portfolio.

That is not to say that the scheme cannot be considered by anyone. You can still look at it as a two-year FD alternative with better rates* and with a partial withdrawal facility. But that is about it.

*As of early February 2023, large banks such as SBI, HDFC Bank and ICICI Bank offer 6.75% to 7% interest on 2-year FDs for non-senior depositors.

How can Women Invest Better?

The basic principles of personal finance are the same for all. For women looking to plan their finances better, here are a few pointers:

- Try to keep at least six months’ worth of expenses as an emergency fund. So, if your monthly expenses are Rs 30,000, you should have about Rs 1.8-2 lakh set aside for emergencies. You can use simple bank FDs with online liquidation facilities for this.

- Given the partial withdrawal facility of the Mahila Savings Certificate, even this can be considered for a portion, if the redemption and payouts are quick enough and easy to manage.

- The MSSC can also be used as a debt instrument and FD alternative to park funds (up to Rs 2 lakh only) for near-term goals in the next two years or so.

- For long-term investments, ladies can use a combination of EPF + VPF (via salary deductions), PPF and regular SIP in equity mutual funds.

- For parents looking to secure their daughter’s future education and marriage expenses, a combination of the Sukanya Samriddhi Scheme and equity funds should be considered.

- Given its women-specific nature, some people are comparing the Mahila Samman Savings Certificate with the Sukanya Samriddhi Yojana. But that is not entirely correct. MSSC has a two-year tenure and is a short-term product. Hence, it cannot ideally be compared with long-term instruments such as SSY, as mentioned in this detailed write-up on MSSC. Also, while both the newly announced MSSC and existing SSY cater to savings for women, the latter is only for parents looking to save for the girl child’s long-term future, while MSSC can be used by women themselves to save money for the short term.