Govt cuts interest rate on PPF, Kisan Vikas Patra, Sukanya Samriddhi by 0.1%

Another scheme, Kisan Vikas Patra will fetch an interest rate of 7.5 per cent as against 7.6 per cent and will now mature in 115 months instead of 113 months.

Written by Smriti Mishra | New Delhi | Updated: July 1, 2017 3:43 pm

The government has cut interest rate on small saving schemes like PPF, Kisan Vikas Patra and Sukanya Samriddhi by 10 basis points for the July-September quarter, a move that could prompt banks to lower deposit rates. The rates have been lowered by 0.1 per cent across all savings instruments compared with the April-June quarter. Interest on savings deposits, though, has been retained at 4 per cent annually. Since April last year, interest rates of all small saving schemes have been recalibrated on a quarterly basis.

According to the revised rates, the return on Public Provident Fund and 5 Year National Savings Certificate will be 7. 9 per cent each as against 7.8 per cent each for the first quarter. Similarly, interest rates on Sukanya Samriddhi Account Scheme and 5-year Senior Citizen Savings Scheme has come down to 8.3 per cent each from an earlier rate of 8.4 per cent each. The interest rates on saving schemes are determined quarterly.

Another scheme, Kisan Vikas Patra will fetch an interest rate of 7.5 per cent as against 7.6 per cent and will now mature in 115 months instead of 113 months.

As per ICRA: “In the scenario of abundant liquidity that has prevailed over the last 8 months, the relative stickiness in small savings rates has not hindered a fall in banks’ deposit rates, unlike in previous phases of tighter liquidity.”

The interest rate on small saving schemes was previously reduced by 10 basis points for the April to June quarter. According to Aditi Nayar, principal economist ICRA: “Given the continuing and substantial liquidity surplus, liquidity management measures and rate action by the RBI are likely to emerge as the key drivers of deposit rate cuts in the ongoing year. However, the relevance of timely changes in small savings rates for policy transmission would re-emerge as liquidity moves closer to neutrality.”

(The writer is an intern with The Indian Express)

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