Government lowers interest rates on Small saving schemes by 0.1%

March 31, 2017

The Union Finance Ministry has lowered interest rates on all nine small saving schemes by 0.1% for the April-June quarter as compared to January-March quarter.
These schemes includes Public provident fund (PPF), National Savings Certificate (NSC), Kisan Vikas Patra, Sukanya Samriddhi Account, Senior Citizens Savings Scheme. It does not include Post Office Savings Account.

Key Facts

Investments in the PPF scheme will fetch lower annual rate of 7.9% from previous rate of 8%.
5-year National Savings Certificate will also fetch lower annual rate of 7.9% from previous rate of 8.
Kisan Vikas Patra (KVP) investments will yield 7.6%
Sukanya Samriddhi Account Scheme, will offer 8.4% annually, from 8.5% at present.
Senior Citizens Savings Scheme will offer 8.4% for the 5-year. The interest rate is paid quarterly.
Term deposits of 1-5 years will fetch a lower 6.9-7.7 % that will be paid quarterly.
The 5-year recurring deposit has been pegged lower at 7.2%.
However, interest on savings deposits has been retained at 4% annually.

The Ministry also has notified that rates of small saving schemes will be linked to government bond yields. The move is expected to prompt banks to lower their deposit rate in line with the small savings rate as offered by government. Since April 2016, interest rates of all small saving schemes are recalibrated on a quarterly on the basis market-linked interest rates system

What are small saving schemes?

Small Savings Schemes are more of social welfare schemes .They are government run schemes that provide higher interest rate. These schemes are meant for small investors backed by a sovereign guarantee and tax benefits.

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