Govt Cuts Interest Rate On Small Savings Schemes By 0.7-1.4% For Apr-June

For the April-June quarter, the government has cut interest rate on number of small savings instruments in the range of 70bps to 140 bps. One basis point is one-hundredth of a percentage point.

Govt Cuts Interest Rate On Small Savings Schemes By 0.7-1.4% For Apr-June

The interest rate on these schemes are revised on a quarterly basis depending on the yield on the 10-year benchmark bonds.

After the rate cut, the popular PPF or public provident fund will fetch 7.1%, down 0.8% from the earlier 7.9%.

The rate on NSC has been decreased by 110 bps to 6.8% from the earlier 7.9%, while the rate on KVP or Kisan Vikas Patra stands reduced by 70 bps to 6.9% from 7.6% earlier.

The 5-year recurring deposit at post office will now fetch 5.8% against the earlier 7.2%. Also, on the time deposits, interest rate has been cut by 100bps to 6.7% from 7.7% earlier.

Small savings instrument	Interest rate in the previous qtr	Interest rate from April-June 2020
PPF	7.9%	7.1%
NSC	7.9%	6.8%
Kisan Vikas Patra	7.6%( with maturity in 113 months)	6.9% (with maturity in 124 months )
5-year RD	7.2%	5.8%
1-year time deposit	6.9%	5.5%
2-year time deposit	6.9%	5.5%
3-year time deposit	6.9%	5.5%
5-year Time deposits	7.7%	6.7%
Senior citizen savings scheme	8.6%	7.4%
MIS	7.6%	6.6%
Sukanya Samriddhi	8.4%	7.6%

Notably, the rate cut comes after a year of pause.

Atanu Chakraborty, Dept. of Economic Affairs Secretary, recently hinted at a rate revision on small savings schemes in the next quarter in line with market rates, the move that will aid faster transmission of key policy rates.

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