The Ministry of Finance has cut interest rate on all small savings schemes for April-June by 10 basis points, except interest rate on savings deposits which has been retained at 4 per cent.
The rates for both Public Provident Fund scheme and 5-year National Savings Certificate have been reduced to 7.9 per cent each for April-June from 8.0 per cent each for January-March. Interest rate for 5-year Senior Citizens Savings Scheme has been cut to 8.4 per cent from 8.5 per cent earlier.
The subscribers of the small savings scheme for girl child, Sukanya Samriddhi Account Scheme, will also earn 8.4 per cent interest rate in the first quarter of the next financial year.
The interest rate on Kisan Vikas Patra will be 7.6 per cent with 113-months maturity for April-June as against 7.7 per cent with 112-month maturity for January-March, the finance ministry notification said.
The 5-year recurring deposit will pay interest rate of 7.2 per cent, with compounding on quarterly basis. Term deposits of 1-5 years will offer 6.9-7.7 per cent that will be paid quarterly.
With an aim to make the small savings interest rates market linked, the finance ministry had in April 2016 moved to a quarterly review of small savings interest rates as opposed to an annual review earlier, saying that the rates of small savings schemes shall be linked to yields of government bonds.
The cut in interest rates on small saving schemes has comes despite government bond yields rising by over 60 bps in the reference period of November-February.
The government had kept interest rates on small savings schemes unchanged in January-March. The move to lower interest rates is expected
to prompt banks to lower their deposits rates in line with the small savings rates offered by the government.