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Government cuts interest rate on small savings plans

Government cuts interest rate on small savings plans

The government on Wednesday trimmed interest rates on small savings schemes such as National Savings Certificate (NSC) and Public Provident Fund (PPF) by 20 basis points but spared senior citizens. One hundred basis points equals one percentage point.

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.

The government had kept rates unchanged in the October-December quarter. The finance ministry also retained the savings deposit rate at 4%.

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

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

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

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.

The lowering of rates on small savings comes against the backdrop of lower fixed deposit rates by banks. The interest rate on the Employees Provident (EPF) is 8.65%.

Source: ET

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