Govt cuts interest rates of small savings schemes by 10 bps for July-September quarter

The Finance Ministry on Friday has reduced interest rates for small savings schemes by 10 bps for the July to September quarter ongoing financial year. The move is aimed at matching the softening of interest rates in the banking sector since the Reserve Bank of India (RBI) cut its benchmark policy rate thrice during the yea

"On the basis of the decision of the government, interest rates for small savings schemes are to be notified on a quarterly basis," the Finance Ministry said while notifying the rates for the second quarter of financial 2019-20

Schemes that will fetch lower interest are Kisan Vikas Patra (KVP), Public Providend Fund (PPF), among others, barring interest on savings deposits that has been retained at 4 percent.

 Govt cuts interest rates of small savings schemes by 10 bps for July-September quarter

File image. Reuers

The government has reduced interest rate on PPF to 7.9 percent from 8 percent, five-year  National Savings Certificate to 7.9 percent, Sukanya Samridhi Yojana to 8.4 percent from 8.5 percent and Kisan Vikas Patra has come down to 7.6 percent.

The interest rate for the five-year Senior Citizens Savings Scheme will now fetch a lower rate of interest at 8.6 percent from 8.7 percent.

Term deposits of 1-3 years will fetch interest rate of 6.9 percent, to be paid quarterly, while the five-year quarterly pegged at 7.7 percent and for recurring 7.2 percent from existing rate of 7.3 percent.

The rates were left unchanged in the April-June quarter of FY20, ahead of Lok Sabha polls in April-May. This was despite government bond yields in the secondary market declining 29 bps in the same period.

Since April 2016, the government has been setting interest rates on small savings schemes every quarter to align it with market rates. Rates were hiked twice— in the October-December quarter by 30-40 bps.

--With PTI inputs

Updated Date: Jun 29, 2019 12:14:04 IST