Small savings interest rates slashed

NEW DELHI, MARCH 18:  

Your small saving investments are will fetch lower returns starting April 1, with the Finance Ministry on Friday announcing revised interest rates for these schemes. The vastly popular Public Provident Fund will earn 8.1 per cent against the current rate of 8.7 per cent.

The new interest rates, which will be applicable for the first quarter of 2016-17 (April 1 to June 30), are 60-130 basis points lower, depending on the scheme.

The interest rate on Kisan Vikas Patra has been slashed to 7.8 per cent from the current 8.7 per cent and that on the five-year National Saving Certificate to 8.1 per cent from 8.5 per cent.

The rate on the five-year Monthly Income Scheme has come down to 7.8 per cent from 8.4 per cent.

The move, announced by Finance Minister Arun Jaitley last year, will help banks in the transmission of lower interest rates.

But the rate cuts will pinch the pocket of the common man, particularly retired people.

The Finance Ministry has also back-tracked on an earlier indication that interest rates on savings schemes for the girl child and for senior citizens would be left untouched as they serve “laudable social development or social security goals.” Rates for these schemes too have been reset. The interest rate on the Sukanya Samriddhi Account and the Senior Citizens Savings Scheme has been cut to 8.6 per cent each from the earlier 9.2 per cent and 9.3 per cent, respectively.

The interest rate on post office savings has been retained at 4 per cent.

“We have aligned the small savings interest rate more in line with the market. Bond yields over the last one year have come down sharply,” said a senior Finance Ministry official.

The next round of recalibration in small savings interest rates will be done on June 15 for the second quarter ending September 30.