Small savings are borrowings by the central government and therefore are absolutely safe. Time deposit rates and postal savings rates are not very different from the rates offered by commercial banks. For example, rates on deposits up to 2 years are lower than the State bank of India term deposit rates. Small savings rate is 7.1 per cent for 1 year, SBI is 7.5 per cent, while for 2 years small savings offers 7.2 per cent and SBI pays 7.75 per cent. For longer terms, the 3 years rate from small savings is 7.4 per cent and by SBI is 7.75 per cent and for 5 years small savings is 7.9 per cent and by SBI is 7.75 per cent. SBI is used as an illustration. There is not much to choose between banks and small savings and here banks will be more attractive considering their reach especially in urban centres and the range of services offered by them may lead customers to them, instead of post offices.
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