Small savings rates cut by 0.1%

A notification said that investments in the PPF scheme would fetch a lower annual rate of 7.9%

The government on Friday lowered interest rates on small-savings schemes such as the public provident fund, one- to five-year time deposits, five-year recurring deposits, the senior citizens scheme Kisan Vikas Patra and the Sukanya Samriddhi scheme for the April-June quarter, a move that could lead to banks cutting their deposit rates as well.

 

Of the 12 small savings schemes, the Centre cut the rates by 0.1 percentage point over those in the January-March quarter for 11 of them, leaving out the savings deposit, which was maintained at 4 per cent. Since April last year, the interest rates for all small savings schemes have been recalibrated on a quarterly basis.

 

“To bring such rates somewhat closer to market rates, the government has decided to effect a reduction of 0.1 percentage point (10 basis points) in interest rates across the board in all the schemes, except the Post Office Savings Account, which has been left untouched,” the finance ministry said in a statement.

 

“Small savings schemes will continue to be attractive as some of them enjoy income tax benefits and additional interest rate spreads,” it said.

 

A notification said that investments in the public provident fund (PPF) scheme would fetch a lower annual rate of 7.9 per cent, the same as the five-year National Savings Certificate. The existing rate for these two schemes is 8 per cent.

 

Kisan Vikas Patra (KVP) investments will yield 7.6 per cent and mature in 112 months. The one for girl child savings, the Sukanya Samriddhi Account Scheme, will offer 8.4 per cent annually, from 8.5 per cent at present, while it will be the same at 8.4 per cent for the five-year Senior Citizens Savings Scheme, on which interest is paid quarterly. Term deposits of one-five years will earn a lower 6.9-7.7 per cent, which will be paid quarterly, while the five-year recurring deposit has been pegged lower at 7.2 per cent.

 

The rates of small savings schemes have been linked to government bond yields since the quarterly revision began.