Interest rates on small savings schemes such as Sukanya Samriddhi, National Savings Certificates (NSC) and PPF may be slashed in the coming months. The union government may take a decision on cutting the interest rates of small savings schemes by the end of June. If this happens, 1 July onwards, small savings schemes will fetch less interest.
The government had on 1 April revoked a steep interest rate cut on small savings schemes such as PPF and NSC, with Finance Minister Nirmala Sitharaman saying it was an oversight, a move seen as an attempt by the BJP to contain the fallout of such a decision hitting common people amid the ongoing elections in West Bengal and Assam.
The government routinely announces interest rates for small savings schemes at the end of every quarter.
Interest rate on PPF was reduced by 0.7% to 6.4% while NSC was to earn 0.9% less at 5.9%. The highest cut of 1.1% was effected in the one-year term deposit. The new rate was brought down to 4.4% as compared to 5.5%.
It is to be noted that the rates on fixed deposits under small savings scheme are regulated by the government while banks are free to decide their deposit and lending rates based on their asset liability position. As a result fixed deposit rates of different banks vary unlike under small savings schemes.
As rates have been restored, PPF and NSC now earns an annual interest rate of 7.1% and 6.8% respectively.
One-year term deposit scheme continues to earn an interest rate of 5.5% during the first quarter of the current fiscal while the girl child savings scheme Sukanya Samriddhi Yojana account earns 7.6% as against reduced rate of 6.9%.
Interest rate on savings deposits has been restored at 4% annually from the reduced rate of 3.5%.
Term deposits of one to five years fetches an interest rate in the range of 5.5-6.7%, to be paid quarterly while the interest rate on five-year recurring deposits earns a higher interest of 5.8% as against the reduced 5.3% currently.