Finance Ministry on Wednesday has announced a cut in interest rates of small savings scheme. According to the circular by ministry dated 31 March, the rates of small savings schemes have been reduced by 50-100 basis points for the first quarter of the financial year 2021-22. The interest rates for small savings schemes are reviewed and notified by the finance ministry on a quarterly basis.
From 1 April, Public Provident Fund (PPF) will get an interest rate of 6.4%. The interest for National Savings Certificate (NSC) have been reduced to 5.9%. Among other small savings scheme, the Sukanya Samriddhi Yojana will fetch the interest rate of 6.9%.
Similarly, the interest rate for the five-year Senior Citizens Savings Scheme has been lowered to 6.5%. The interest on the senior citizens’ scheme is paid quarterly. The interest rate on Kisan Vikas Patra (KVP) has been cut to 6.2%.
Interest rate on post office savings deposits has been slashed to 3.5%. On the other hand, term deposits of one-five years will fetch interest rate in the range of 4.4-5.1%, to be paid quarterly, while the interest rate on five-year recurring deposit is pegged at 5.8%.
The government continues to rely on small savings for financing its fiscal deficit, say economists. “For FY22 again financing from small savings is pegged at a significant ₹3.9 lakh crore or 26% of the fiscal deficit,” SBI economists had earlier said in a note.
For the April-June quarter of last year, the government had cut interest rates on small savings schemes by up to 140 basis points and since then they have remained steady. With this reduction, the interest rates of small savings schemes have been slashed by a total of 120-250 bps during the current financial year.
The finance ministry also extended the deadline for linking the Permanent Account Number (PAN) to Aadhaar by another three months.”Central Government extends the last date for linking of Aadhaar number with PAN from 31st March, 2021 to 30th June, 2021, in view of the difficulties arising out of the COVID-19 pandemic,” the Income Tax department tweeted.