Small Savings Schemes interest rates 2020: The interest rates on small savings schemes like Public Provident Fund (PP), National Savings Certificate (NSC), Kisan Vitac Patra (KVP) etc. may come down in the next quarter. News agency PTI reported today that the Department of Economic Affairs Secretary Atanu Chakraborty has hinted at revision in small savings rate next quarter. The revision could be in line with market rate, a development that could lead to speedier transmission of monetary policy rate.
For the current quarter, the Central government had refrained from cutting interest rates on small savings schemes. “In India, right now we have about Rs 12 lakh crore in small savings schemes and roughly Rs 114 lakh crore in bank deposits. So the liability side of banks is getting affected by Rs 12 lakh crore. When banks say this, it seems a bit of a tail wagging the dog situation,” Chakraborty was quoted as saying.
The official further said that the rate of small savings should have some linkages to market rate, which is largely determined by the G-sec rates.
Chakraborty said that the report of Shyamala Gopinath Committee report has been accepted. However, operation of the linkage is still in works. “Wait for this quarter interest rates. That will give you a fairly good indication.”
There has been some signalling issue, which is being looked at, Chakraborty official told the news agency.
The report cited bankers’ complain that high small savings rates prohibits them from cutting their deposit rates immediately to check flight of savings. At present, there is a difference of nearly 100 basis point between deposit rate of banks and small savings rate for one-year maturity.
No doing away with small savings
The DEA official said that although the government is not dependent on small savings schemes, there is no plan to do away with the scheme as people use those instruments.