The Government has lowered the interest rates on small savings schemes inclusive of PPF and NSC by 0.2 percentage points. This has been cut for the period between January and March, 2018 in comparison to rates that applied in the last quarter.
This move is seen as vital in spurring banks to reduce their deposit rates even further. However, 8.3% has been kept for investments in the Senior Citizens Savings Scheme of five years. The interest rate is paid out on a quarterly basis. The official notification released by Union Finance Ministry stipulates that interest rates have come down for schemes like the Sukanya Samriddhi Account, National Savings Certificate or NSC, Public Provident Fund or PPF, KVP or Kisan Vikas Patra and others.
Savings deposits will continue to earn 4% interest per annum. From April 2016, small savings scheme interest rates have been considered and evaluated on a quarterly basis. NSC and PPF will have interest rates of 7.6% while Kisan Vikas Patra will be maturing in 11 months with yield of 7.3%. The Sukanya Samriddhi Scheme will be offering 8.1% annually now in comparison to 8.3% earlier. Term deposits with tenors between 1 and 5 years will have interest rates of 6.6% to 7.4% which will be paid out quarterly while 6.9% is the interest rate for recurring deposits of 5 years.
The Union Finance Ministry has also made it clear that small savings scheme interest rates will be tied to the returns from government bonds. This could well lead to deposit rates being lowered by Indian banks.