Since April 1, 2016, the rates of interest on small savings are notified by the government on a quarterly basis and are linked to the yields of the government securities (G-Sec) of similar maturities.
Interest Rates Post Office: The interest rates on post office small savings investments have been kept constant for the third quarter of the financial year 2019-29. This means the investments in PO savings schemes from October 1 till December 31 will carry the same rates of interest as they were in the previous quarter of the financial year. The government sets the rate of interest on post office investments such as Public Provident Fund (PPF), National Savings Certificates (NSC), Senior Citizens Savings Scheme (SCSS), Sukanya Samriddhi, and KVP etc for each quarter of the FY. Since the beginning of April 1, 2016, the interest rates on the small savings are being notified by the government on a quarterly basis. The interest rates are linked to the yields of the government securities (G-Sec) of similar maturities.
Interest rates on Post Office Schemes
For the period October 1 till December 31, 2019 ( Remains same as previous quarter)
Earlier, for the July to September quarter of the FY, the interest rate across all small savings investments was cut by 0.1 per cent per annum. However, the post office investments interest rates had remained unchanged in the April-June 2019 quarter.
The post office investments such as Public Provident Fund (PPF), National Savings Certificates (NSC), Senior Citizens Savings Scheme (SCSS) and Sukanya Samriddhi, KVP etc are some of the popular investment options among lakh of investors looking for a fixed and assured income as all of them are backed with a government guarantee.
The G-sec yield last year ( October 1) was at 7.99 per cent and is at 6.71 per cent as on September 30, 2019. The Reserve Bank of India has already cut the repo rate by 110 basis points in this calendar year 2019, still, the lending rates in the economy are considered to be high.
Most front line commercial banks are offering lower returns than Small Finance banks. Depending on the bank and tenure, most Small Finance Banks are offering an interest rate of around 8 per cent on some of their tenure.
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Senior citizens and retirees who bank upon small savings schemes will get relief from this announcement. In a falling interest rate regime, senior citizens and retirees who depend on fixed-income investments for their regular income needs, fall short of investment options. When the rate of interest falls, the existing investments of senor citizens face the re-investment risk. On renewal, the yield on fresh investments is lesser because of which the cash-in-hand gets squeezed, impacting their regular income needs.
By keeping the rate of interest constant, amidst a falling interest rate scenario, the investment in PO schemes remains attractive. Choose to go with the investment based on your goal as most post office investments are long term in nature. Also, keep the taxation into consideration before investing in them.