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Govt cuts interest rates on small savings schemes like NSC, PPF by 20 bps

Move to prompt banks to lower deposit rates

Press Trust of India  |  New Delhi 

Govt cuts interest rate on various small savings schemes by 20 bps

The government on Wednesday slashed interest rates on small savings schemes, including and PPF, by 0.2 percentage point for the January-March period from the rates applicable in the previous quarter, a move that will prompt banks to lower deposit rates.

At the same time, investments in the five-year Senior Citizens Savings Scheme has been retained at 8.3 per cent. The interest rate on the senior citizens scheme is paid quarterly.

A finance ministry notification said rates have been reduced across the board for schemes such as (NSC), Sukanya Samriddhi Account, (KVP) and (PPF). However, interest on savings deposits has been retained at 4 per cent annually.

Since April last year, interest rates on all have been recalibrated on a quarterly basis.

As per the notification, and will fetch a lower annual rate of 7.6 per cent while KVP will yield 7.3 per cent and mature in 11 months.

The girl child savings scheme will offer 8.1 per cent from existing 8.3 per cent annually.

Term deposits of 1-5 years will fetch a lower interest rate of 6.6-7.4 per cent, to be paid quarterly, while the five-year recurring deposit is pegged at 6.9 per cent.

"On the basis of the decision of the government, interest rates for 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 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.


First Published: Thu, December 28 2017. 07:58 IST