Centre on Friday cut interest rates on small saving schemes, including, NSCs, Public Provident Fund (PPF) and Kisan Vikas Patra by 10 basis points. The revised PPF and NSCs are set at 7.8%, while KVPs will earn only 7.5%. The new rates for Senior Citizen’s Savings Scheme (SCSS) and Sukanya Samriddhi Yojana have been revised to 8.3%. The small saving schemes interest rates, which are linked to the benchmark 10-year government bond yields, are revised every three months. The last revision in rates came in the month of March, when the rates for all schemes had been reduced by 10 basis points.
Prior to the revision, PPF rates were set at 7.9 per cent, Kisan Vikas Patra (KVP) investments at 7.6 per cent, and the Sukanya Samriddhi Account Scheme at 8.4 per cent. Last time, the first rate cut had come in the month of March – a move hailed by experts as both politically bold as well as economically correct. “Business and industry should get the benefits of lower interest rates. The only way of ensuring that would be that small saving rates also fall in line with the overall trajectory of softening interest rates,” says Ashish Kapur, CEO, Invest Shoppe India Ltd.
“On the basis of the decision of the government, interest rates for small savings schemes are to be notified on a quarterly basis,” the ministry had said while issuing a notification for the rates for the fourth quarter of 2016-17 starting from April 1, 2017. The ministry, while announcing the quarterly setting of interest rates, had said the rates of small saving schemes would be linked to government bond yields. The move is expected to prompt banks to lower the deposit rate in line with the small savings rate as offered by the government.