Govt keeps interest rate on PPF, other small savings schemes unchanged

The government on Monday kept the interest rates for small savings schemes which include PPF, POMIS, NSC etc. unchanged for the second quarter of the current financial year.

The interest rate on PPF, for example, has been kept unchanged since January at 7.6%.

Due to the increase in interest rates in the economy, experts had earlier predicted that the government would increase interest rates on small savings schemes as well.

Several of these schemes such as PPF, NSC, post office monthly income scheme, and Senior Citizens Savings Schemes are popular with fixed income earners.

“The rates of interest on various small savings schemes for the second quarter of the financial year 2018-19 starting 1st July, 2018, and ending on 30th September, 2018 shall remain unchanged from those notified for the first quarter of financial year 2018-19,” the Ministry of Finance said in a statement.

The formula given by the Shyamala Gopinath Committee to determine the interest rates has not been strictly followed from the two preceding quarters, i.e., January-March, 2018 and April-June, 2018. According to the committee, the interest rates of different schemes should be 25-100 basis points higher than the yields of government bonds of similar maturity. The committee has also suggested that the revision in interest rates should be done annually. However, the government has chosen to go with reviewing the interest rates every three months.

The Reserve Bank of India (RBI) recently raised its repo rate by 25 basis points to 6.25%, its first hike in over four years, amid inflation concerns.

While the government has kept interest rates unchanged, banks have been raising rates offered on fixed deposits (FD). Currently, State Bank of India (SBI), the country’s largest bank, is offering interest rate of 6.65 per cent for FDs with a term of one year but less than two years.