Government of India cuts interest rates on small savings schemes

New Delhi: The government of India on Wednesday cut interest rates on small savings schemes such as National Savings Certificate (NSC) and Public Provident Fund (PPF) by 20 basis points but spared senior citizens. One hundred basis points equals one percentage point.

The government has kept rates unchanged in the October-December quarter. The finance ministry also retained the savings deposit rate at 4%.

The rate on the five-year senior citizen savings scheme was retained at 8.3% for the three-month period starting from January 1, 2018. Small savings rates are being revised on a quarterly basis since last year.

“The government revised interest rates on small savings instruments effective 1st Jan… Still interest rates higher than comparable instruments. Interest rates on senior citizens deposit scheme unchanged at 8.3% and savings account also unchanged at 4%,” tweeted economic affairs secretary Subhas Chandra Garg.

The PPF scheme will now fetch a rate of 7.6%, marginally lower than the rate of 7.8% in the October to December quarter. The five-year national savings certificate plan will fetch a rate of 7.6%. while the rate on Kisan Vikas Patra has been reduced to 7.6% from 7.8%.

Government revised interest rates on small savings instruments effective 1st Jan. Reduced interest rates by .2%. Still interest rates higher than comparable instruments. Interest rates on senior citizens deposit scheme unchanged at 8.3% and savings account also unchanged at 4%.

— Subhash Chandra Garg (@SecretaryDEA) December 27, 2017

The rate on the Sukanya Samriddhi account scheme has been lowered to 8.1% from 8.3% while the five-year recurring deposit will now have a rate of 6.9%, lower than the 7.1% in the previous quarter. Term deposits of one to five years will fetch a lower interest rate of 6.6-7.4%, and will be paid quarterly. The rate on the five-year monthly income account is down to 7.3% from 7.5%. It will be paid monthly.

The lowering of rates on small savings comes against the backdrop of lower fixed deposit rates by banks. The interest rate on the Employees Provident (EPF) is 8.65%.