The government may declare the small savings interest rate for the quarter January to March 2020 soon. Is this the last chance to get a higher interest on your deposits?
There may be just about a day left for you to lock-in your money in post office deposits at a higher rate of interest. Before the start of every quarter of the year, the government sets the interest rate on the post office small savings investments such as National Savings Certificates (NSC), KVP, Time-deposits, Public Provident Fund (PPF) etc. For the existing quarter of October to December, the rate of interest was kept constant as that of July to September. The government may declare the small savings interest rate for the quarter January to March 2020 soon. Is this the last chance to get a higher interest on your deposits?
The interest rate on bank fixed deposits offered by most front line commercial banks are in the range of 6.25 per cent per annum to 6.5 per cent per annum. Comparatively, the post office schemes are offering a higher rate of interest of around 7.5 per cent and even higher.
Currently, the SBI 1-year FD is offering 6.25 per cent per annum for tenure ranging from 1 to 10 years.
Some other bank FD interest rates ( 1 to 10 years) are – Axis bank FD is giving 6.4 per cent per annum to 6.5 per cent per annum, ICICI Bank FD is giving 6.2 per cent per annum to 6.4 per cent per annum, HDFC Bank FD is giving 6.3 per cent per annum to 6.4 per cent per annum across tenures.
In comparison, the PO schemes such as Time Deposit is offering 6.9 per cent per annum on 1, 2, 3 tenure and on 5-year tenure, it is 7.7 per cent per annum. On PO MIS, the current rate of interest is 7.6 per cent per annum, while on KVP it is 7.6 per cent per annum (113) and on NSC it is 7.9 per cent per annum.
Since April 1, 2016, the government has been fixing the interest rates on the small savings on a quarterly basis. The interest rates are linked to the yields of the government securities (G-Sec) of similar maturities. Once invested, in the case of NSC, KVP, Time deposits, Senior Citizens Savings Scheme (SCSS), the rate of interest remains fixed for the investor until maturity. However, for PPF and Sukanya Samriddhi Yojana (SSY), the interest rate will vary each quarter as decided by the government.
As the interest rate is looking to fall in the short to medium term, PO schemes appear attractive. However, predicting the rate of interest over the long term is a difficult task. Invest in PO schemes based on your risk profile and long term goals into the context. And, remember except PPF and SSY, the interest earned in all other PO investment is taxable.