New Delhi, March 31, 2017

The government has lowered the interest rates on small savings schemes like PPF, Kisan Vikas Patra and Sukanya Samriddhi scheme by 0.1 per cent for the April-June quarter, a move that would prompt banks to cut their deposit rates.

For April-June, the rates have been lowered by 0.1 per cent across the board compared to January-March. However, the interest rates on savings deposits have been retained at 4 per cent annually.

Since April last year, the interest rates of all small savings schemes have been recalibrated on a quarterly basis.

A Finance Ministry notification said investments in the public provident fund (PPF) scheme will fetch a lower annual rate of 7.9 per cent, the same as five-year National Savings Certificate. The existing rate for these two schemes is 8 per cent.

Kisan Vikas Patra (KVP) investments will yield 7.6 per cent and mature in 112 months.

The one for girl child savings, Sukanya Samriddhi Account Scheme, will offer 8.4 per cent annually from 8.5 per cent at present, while it will be the same at 8.4 per cent for the five-year senior citizens savings scheme. Interest rate on senior citizens scheme is paid quarterly.

Term deposits of one to five years will fetch 6.9-7.7 per cent that will be paid quarterly, while the five-year recurring deposit has been pegged lower at 7.2 per cent.

“On the basis of the decision of the government, interest rates for small savings schemes are to be notified on a quarterly basis,” the Ministry said while notifying the rates for the fourth quarter of 2016-17 starting from April 1, 2017.

While announcing the recalibration of interest rates on a quarterly basis, the ministry had said the interest rates on small savings schemes would be linked to government bond yields.

The move is expected to prompt banks to lower the deposit rate in line with the small savings rate as offered by the government.

[The Hindu Business Line]