Government lowers Interest Rates of Small Saving Schemes and PPF

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On 27th December, government has decided to bring down interest rates on small savings scheme which includes NSC (National Savings Certificate) and PPF (Public Provident Fund) by 0.2 percent for the January to March period from the rates applicable in the previous quarter; it is a move that will result in banks to lower deposit rates.

Simultaneously, investments in the five – year Senior Citizens Savings Scheme will perpetuate at 8.3 percent. On Senior Citizens’ scheme, the interest rate is paid quarterly.

A notification released by the finance ministry reads that it has reduced the interest rates of many small savings schemes.

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

Interest rates on all small savings schemes are updated on a quarterly basis since April last year.

According to the notification which was released by the finance ministry

PPF and NSC will fetch a lower annual rate of 7.6 percent while KVP will yield 7.3 percent and mature in 11 months.

Sukanya Samriddhi Account which is a girl child savings scheme will offer 8.1 percent where the present interest rate of the scheme is 8.3 percent annually.

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

At the time of notifying the rates for the fourth quarter of the financial year 2017 – 18, the ministry further says that

On the basis of the decision of the government, interest rates for small savings schemes are to be notified on a quarterly basis.

Furthermore, the ministry says that rates of small savings scheme would be linked to government bonds yields. And the move is likely to see banks lowering their deposit rates in line with the small savings rate offered by the government.

Highlights
  • Government lowers interest rates on small savings scheme such as NSC, PPF etc.
  • Since April last year, interest rates on all small savings schemes have been regulated on a quarterly basis.
  • Sukanya Samridhi Scheme (a girl child scheme) will offer 8.1 percent from existing 8.3 percent annually.

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