Small savings rate may remain unchanged for Oct-Dec qtr despite RBI moves

If this happens, it will be the 10th straight quarter of status quo; govt official says Centre did not cut rates when policy rates were being cut during pandemic

The central government is unlikely to hike interest rates of small saving schemes for the October-December 2022 quarter, Business Standard has learnt. If this happens, it will be the 10th consecutive quarter of small savings rates remaining unchanged.

The Reserve Bank of India has raised rates in three separate moves since May, totaling 140 basis points. The market expects another rate hike later this week as the RBI struggles to bring down retail inflation below the Monetary Policy Committee’s upper target of six per cent.

As the rate hikes are transmitted down the chain, banks have also increased their deposit and interest rates, leading to speculation on whether or not the government will do the same for small savings rates, to keep the schemes attractive for investors.

“Yes the rate hikes have happened, but one also needs to keep in mind that the Centre did not cut small savings rates when policy rates were being cut during the pandemic,” said a senior government official.

“Ultimately, it a balance between providing the best rates to investors and looking at the government’s cost of borrowing,” the official said. It is leant that a final decision has not been taken yet, and will be taken by the political head, in this case Finance Minister Nirmala Sitharaman.