Reforming small savings

Interest rates should be linked to market outcomes

The government has lowered the interest rates for depositors in various government-run small savings schemes, including the National Savings Certificate (NSC) and Public Provident Fund, by 10 basis points for the July-September quarter. Savings deposit rates have, however, been maintained at 4 per cent annually. The NSC will now fetch an annual interest rate of 7.9 per cent from the existing rate of 8 per cent, while the Kisan Vikas Patra will yield 7.6 per cent with maturity of 113 months. The government deserves credit for this move towards rationalising the interest rate transmission mechanism, in line with the promise