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Govt cuts interest rates on small savings schemes by 0.2 percentage points

Interest on savings deposits were kept unchanged at 4 per cent. The interest rate for investments in the five-year Senior Citizens Savings Scheme has been retained at 8.3 per cent

By: Express Web Desk | New Delhi |
December 27, 2017 10:16:33 pm
Govt cuts interest rates for savings schemes Term deposits of 1-5 years would fetch a lower interest rate of 6.6-7.4 per cent. (Photo for representation)

The government on Wednesday cut interest rates on small savings schemes, including National Savings Certificate and Public Provident Fund, by 0.2 percentage points for the January to March period even though interest on savings deposits were kept unchanged at 4 per cent. The move will prompt banks to lower deposit rates.

A Finance Ministry notification said the interest rate for investments in the five-year Senior Citizens Savings Scheme had been retained at 8.3 per cent while term deposits of 1-5 years would fetch a lower interest rate of 6.6-7.4 per cent, to be paid quarterly. The five-year recurring deposit has been pegged at 6.9 per cent.

The interest rates for all small savings schemes have been rejiged on a quaterly basis since April 2016. As per the notification, PPF and NSC will fetch a lower annual rate of 7.6 per cent while Kisan Vikas Patra (KVP) will yield 7.3 per cent and mature in 11 months. The girl child savings scheme Sukanya Samriddhi Account will offer 8.1 per cent from existing 8.3 per cent annually.

“On the basis of the decision of the government, interest rates for small savings schemes are to be notified on a quarterly basis,” the ministry said, while notifying the rates for fourth quarter of financial year 2017-18.

While announcing the quarterly setting of interest rates, the ministry had said that rates of small savings schemes would be linked to government bond yields. The move is expected to see banks lowering their deposit rates in line with the small savings rate offered by the government.

(With inputs from PTI)

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