The interest on small savings scheme fell on Tuesday as the Reserve Bank of India’s (RBI) has cut its policy rates. The government revised the interest rates on small savings scheme for April-June by anywhere between 70-140 bps.
To counter the economic damage being caused by coronavirus, RBI recently announced a surprise 75 bps cut in its key interest rate.
The Public Provident Fund will now fetch 7.1% returns, after an 80 bps cut in its interest rate. It used to earlier give 7.9% returns to its depositors.
The interest rate on National Savings Certificate has been slashed by 110 bps to 6.8%.
The interest rate on Kisan Vikas Patra has been cut by 70 bps to 6.9%, which will mature in 124 months. The interest rate for 5-year Senior Citizens Savings Scheme was slashed by 120 bps to 7.4% as against 8.6% earlier, while that for savings deposits was kept unchanged at 4% a year. The interest on the senior citizens’ scheme is paid quarterly.
On 31 December, 2019, the government decided to keep interest rates for small savings schemes like PPF and NSC unchanged at 7.9% for the fourth quarter of the current financial year, while the rate for the Kisan Vikas Patra maturing in 113 months was kept at 7.6%.
The Sukanya Samriddhi Yojana will offer 7.6% in the April-June 2020 quarter as against 8.4% during the January-March 2020 quarter.
The interest rate on five-year Recurring Deposit Rate sees a 140 bps cut to 5.8%. For five year time-deposit, it has been brought down from 7.7% to 6.7% and from 6.9% to 5.5 per cent for three-years, two-years and one-year time deposits.
Rates on small savings schemes are revised on quarterly basis. The latest rate cuts could lead to speedier transmission of monetary policy rate cuts as the bankers have been complaining that high rates on small savings schemes prohibit them from cutting deposit rates.
