The government Friday reduced interest rate on small savings schemes by 0.1 per cent for the July-September quarter.
The decision is aimed at matching the softening of interest rates in the banking sector after the RBI cut its benchmark policy rate thrice during the year.
Barring interest on savings deposits, which has been retained at 4 per cent annually, rate on all other schemes has been slashed by 0.1 per cent.
"On the basis of the decision of the government, interest rates for small savings schemes are to be notified on a quarterly basis," the Finance Ministry said while notifying the rates for the second quarter of financial year 2019-20.
Public Provident Fund (PPF) and National Savings Certificate (NSC) will fetch annual interest rate of 7.9 per cent from the existing rate of 8 per cent, while Kisan Vikas Patra (KVP) will yield 7.6 per cent with maturity of 113 months.
At present, interest rate on KVP is 7.7 per cent and maturity is 112 months. The girl child savings scheme Sukanya Samriddhi Account will fetch a lower return of 8.4 per cent from 8.5 per cent.
Term deposits of 1 year to 3 years will fetch interest rate of 6.9 per cent, to be paid quarterly, while the five-year quarterly pegged at 7.7 per cent and for recurring 7.2 per cent from existing rate of 7.3 per cent.
Interest rate for the five-year Senior Citizens Savings Scheme will now fetch a lower rate of interest at 8.6 per cent from 8.7 per cent.