New Delhi, January 3, 2017

The government has kept the interest rate on small savings schemes such as PPF and Kisan Vikas Patra unchanged for the January-March quarter, going against the expectations that the rates will be cut.

Investments in the popular public provident fund (PPF) scheme will continue to fetch an annual interest rate of 8%, the same as 5-year National Savings Certificate, the finance ministry said in a notification.

With banks cutting the fixed deposit rates following surge in deposits due to demonetisation, the interest differential with small savings schemes will widen making the latter more attractive.

Small savings rates are revised every quarter based on the movement in yields on government securities in secondary market. Kisan Vikas Patra (KVP) investments will continue to yield 7.7% per annum and mature in 112 months.

Sukanya Samriddhi Account Scheme, scheme for the girl child, will continue to give out 8.5% annually while it will be the same as 8.5% for the 5-year Senior Citizens Savings Scheme.

A savings deposit will fetch 4%, same as earlier while term deposits of 1-5 years will offer 7-7.8% that will be paid quarterly. The 5-year recurring deposit will continue to earn 7.3%. Most banks are offering less than 7% annual return on their deposits. The differential will keep small savings schemes attractive, but that should not worry banks flush with deposits due to the demonetisation.

[The Economic Times]