The Central Government on Thursday kept interest rates on small savings schemes, such as the Public Provident Fund (PPF) and National Savings Certificate (NSC), unchanged for the July to September quarter of FY23 amid high inflation and rising interest rate.
This is the ninth quarter in a row that small savings interest rates have not changed. The interest rate on small savings schemes has not been revised since the first quarter of 2020-21.
New investments made during the second quarter of FY 2022-23 into these schemes will also earn the same interest rates as in the previous quarter.
The PPF will continue to earn 7.10%. The Senior Citizens Savings Scheme (SCSS) will continue to earn 7.40%, and post office time deposits will fetch 5.5-6.7%, the Finance Ministry said.
Interest rates on small savings schemes are reset on a quarterly basis, in line with the movement in benchmark government bonds of similar maturity. During the last quarter, the government had decided to maintain the status quo.
The Shyamala Gopinath committee in 2011 had recommended to make small savings scheme market linked.
Analysts had indicated a possibility of the interest rates being raised this time given the increase in G-Sec yields over the last quarter. As of today, India 10-year Bond yield was at 7.424%, compared with 6.843% on 31 March. Notably, the Reserve Bank of India (RBI) has also raised the policy interest rate by 90 basis points during the April-June quarter.
Amid rising inflation, the government in March kept interest rates unchanged for small savings schemes, including PPF and NSC, for the first quarter of 2022-23.
PPF and NSC will continue to carry an annual interest rate of 7.1% and 6.8%, respectively, in the first quarter of the next fiscal.
“The rate of interest on various small savings schemes for the first quarter of the financial year 2022-23, starting from April 1, 2022, and ending on June 30, 2022, shall remain unchanged from the current rates applicable for the fourth quarter (January 1, 2022, to March 31, 2022) for FY 2021-22,” the finance ministry had said in a notification earlier.
The one-year term deposit scheme will continue to earn an interest rate of 5.5% in the first quarter of the next fiscal while the girl child savings scheme Sukanya Samriddhi Yojana will fetch 7.6%.
It is to be noted that the country’s biggest lender State Bank of India (SBI) offers 5% interest rate on one-year fixed deposit.
The interest rate on the five-year senior citizens’ savings scheme will be retained at 7.4%. The interest on the senior citizens’ scheme is paid on a quarterly basis.
The interest rate on savings deposits will continue to be at 4% per annum.
Term deposits of one to five years will fetch an interest rate in the range of 5.5-6.7%, to be paid quarterly while the interest rate on five-year recurring deposits will earn a higher interest of 5.8%.
Recently, the Provident Fund (PF) rate was reduced to a four-decade low of 8.1% for 2021-22 from 8.5%.
Defending the proposal to cut interest rate paid on employees’ provident fund deposits, Finance Minister Nirmala Sitharaman, earlier this month, said the rate is dictated by today’s realities where interest rate on other small saving instruments was even lower.
FM Sitharaman had also cited the comparative prevailing interest rates of other schemes saying Sukanya Samriddhi Yojana offers 7.6%, Senior Citizen saving scheme (7.4%) and PPF (7.1%) while SBI’s 5-10 year fixed deposits gives 5.50%.