|
New Delhi, February 22:: An interest rate cut on public provident fund (PPF) by over 100 basis points (bps) may be announced by Union finance minister Yashwant Sinha in his Budget speech next week. Informed sources said the finance ministry was, in fact, pitching for a 100 bps to 200 bps cut in the PPF rate.
The capital market may also get a booster dose with possible long-term capital gains tax relief on equity investments. Long-term gains would imply investments made for over a year at least. However, the finance ministry has decided against scrapping the RBI India Relief Bonds scheme for now, despite actively considering the Y V Reddy panel’s recommendation on the matter. Sources said that the Reserve Bank of India( RBI) had advised against the move as it could generate widespread resentment among small investors. The interest rate cut on PPF in the next Budget would make it two major cuts in a row. Finance minister Yashwant Sinha had reduced the administered interest rates by 150 basis points in the Budget for 2001-02. As a result, PPF interest rate has already gone down from 11 per cent to 9.5 per cent.
The move to cut interest rate on PPF further follows Mr Sinha’s announcement in the 2001-Budget to explore a better system for determining administered interest rates, and setting up of a committee under RBI deputy governor Dr Y V Reddy to look into the matter.
The panel in its report had suggested benchmarking of the rates with the yields on government securities of similar maturity periods.
Considering the fact that yields on government securities with maturity periods of five to 10 years is currently ranging between 7-7.5 per cent, benchmarking of the PPF interest rates with them, as per the Reddy panel’s recommendation, would mean at least a 200 basis point cut in the current interest rate. Simultaneously, sources said, interest rate on small savings might be reduced in the similar fashion in the Budget as recommended by the Reddy panel.
On the various small savings instruments, the committee has recommended that the interest rate on one-year postal deposit may be benchmarked to the average yield of 364-day Treasury bills traded in the secondary market, during the previous year. For post office savings bank accounts, the recommendation is that the present rate of 3.5 per cent may continue so long as the inflation rate rules above 3.5 per cent or the savings bank deposit...
| Single Page Format | 1 - 2 - Next |
Discuss this story on expressindia forums
|
|
 |
 |
 |
About Us | Contact Us | Advertisers | Site Map | Make us your homepage | Work for Us | RSS | Subscribe | Electronic Edition | Privacy Policy© 2009: The Indian Express Limited. All rights reserved throughout the world
