The Union government on Friday slashed 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%. Now, we all know that it’s not good for end user or customer but financial experts are of the belief that the reduction is good for the industry. The reason they cite is – It will help banks bring down the lending rates. Hence, it is a sort of government’s resolve to keep lowering cost of capital in the country’s economy.
The rates will be valid for the July- September quarter. For readers information – A basis point is one-hundredth of a percentage point.
As per the notification, PPF will fetch a lower annual rate of 7.8% while KVP will yield 7.5% and mature in 115 months. The girl child savings scheme Sukanya Samriddhi Account will offer 8.3% annually. Investments in the five-year Senior Citizens Savings Scheme will yield 8.3%. The interest rate on the senior citizens’ scheme is paid quarterly.
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.
Noteworthy, interest rates on small savings are linked to the benchmark 10-year government bond yields. And, interest rates are revised in every three months time period. In the last revision, the rates for all schemes were reduced by 10 basis points. For April-June, rates were lowered by 0.1 per cent across the board compared to January-March. However, interest on savings deposits has been retained at 4 per cent annually.
Since April last year, interest rates of all small saving schemes have been recalibrated on a quarterly basis.