Banks and other financial institutions have started cutting rates after the RBI cut the policy rates to lift the sentiment as the economy has come to almost standstill due to the nationwide lockdown.
Banks and other financial institutions have started cutting rates after the Reserve Bank of India (RBI) cut the policy rates – repo rate by 75 bps to 4.4 per cent, reverse repo rate by 90 bps to 4 per cent and Cash Reserve Ratio (CRR) by 100 bps to 3.0 per cent – to lift the sentiment as the economy has come to almost standstill due to the nationwide lockdown imposed to contain the spread of highly contagious Novel Coronavirus Covid-19.
Along with others, while the largest public sector bank State Bank of India (SBI) has cut the lending rate on home loan by about 0.35 per cent and interest on savings bank account by 0.25 per cent, the government has also cut rates on small savings schemes including a 1.2 per cent cut in the interest rate of Senior Citizen Savings Scheme (SCSS) to 7.4 per cent per annum (compounded quarterly and paid).
As in absence of regular income, senior citizens generally have very low risk appetite and rely mostly on fixed income instruments like fixed deposit (FD), SCSS etc and rate cuts create great inconvenience for them especially when the rate of inflation is high.
However, senior citizens of 60 years or more age still have a chance to get a higher than inflation rate of 8.3 per cent per annum for the next 10 years by investing in Pradhan Mantri Vaya Vandana Yojana (PMVVY), which also bears the guarantee from the Government of India.
Under PMVVY, investors also get options to avail interest payout yearly or half yearly or quarterly or monthly. The rates will be adjusted against different payout options as 8.3 per cent for yearly payout, 8.13 per cent for half yearly payout, 8.05 per cent for quarterly and 8 per cent for monthly payouts.
An investor may invest minimum Rs 1,44,578 to get minimum yearly pension of Rs 12,000, while maximum amount may be invested is Rs 15 lakh for the maximum pension amount of Rs 10,000 per month.
The sole distributor of Pradhan Mantri Vaya Vandana Yojana is Life Insurance Corporation (LIC) of India.