- April 4, 2020
- Posted by: InvestzaCapital
- Category: Personal Finance
The government has reduced the rate of interest on 8 small savings schemes by 70-140 basis points. These schemes include Public Provident Fund Scheme, National Saving Certificate, Senior Citizen Saving Scheme, Kisan Vikas Patra and Sukanya Samriddhi Account Scheme.
Investors parking money in small savings schemes will feel the pinch amid the covid-19 outbreak. For the first quarter of FY 2020-21, the government has reduced the rate of interest on 8 out of 9 small savings schemes by 70-140 basis points.
These 8 small saving schemes include Public Provident Fund Scheme, National Saving Certificate, Senior Citizen Saving Scheme, Kisan Vikas Patra and Sukanya Samriddhi Account Scheme.
Now the Public Provident Fund will fetch 7.1% returns, as against 7.9% in Jan-March quarter of FY 2019-20. Similarly, the interest rate on National Savings Certificate has been slashed by 110 bps to 6.8% from 7.9%.
The interest rate on Kisan Vikas Patra has been cut by 70 bps to 6.9%. The interest rate for 5-year Senior Citizens Savings Scheme has been reduced by 120 bps to 7.4%. For Sukanya Samriddhi Account Scheme, the rate of interest has been slashed to 7.6% from 8.4%.
Only for savings deposits, the interest rate was kept unchanged at 4% a year.
|Instruments||Rate of interest Jan-Mar||Rate of interest Apr-Jun||Compounding frequency|
|1-3 year Time Deposit||6.9||5.5||Quarterly|
|5 year Time Deposit||7.7||6.7||Quarterly|
|5 year Recurring Deposit||7.2||5.8||Quarterly|
|Senior Citizen Saving Scheme||8.6||7.4||Quarterly and paid|
|Monthly Income Account||7.6||6.6||Monthly and paid|
|National Saving Certificate||7.9||6.8||Annually|
|Public Provident Fund Scheme||7.9||7.1||Annually|
|Kisan Vikas Patra||7.6 (will mature in 113 months)||6.9 (will mature in 124 months)||Annually|
|Sukanya Samriddhi Account Scheme||8.4||7.6||Annually|
The decision to cut the rate of interest in small savings schemes comes after the RBI reduced repo rate by 75 basis points last week and announced a slew of measures to ensure speedier transmission of these rate cuts. The latest rate cut on small savings schemes could lead to speedier transmission of monetary policy rate cuts as the bankers have been complaining that high rates on small savings schemes have acted as a deterrent for them to reduce their own deposit rates.