The interest rates on public provident fund (PPF) and other small savings instruments have been cut in the wake of falling interest rate across the financial system. Barring interest on savings deposits, which has been retained at 4% annually, the government today reduced interest rate on small savings schemes, including NSC and PPF, by 10 basis points for the July-September quarter. The Reserve Bank of India has cut interest rate by 75 basis points since the start of this year while many banks have also lowered their fixed deposit or FD rates. The interest rate on small savings schemes including PPF, which are revised on a quarterly basis, had seen a sharp hike in October-December quarter and since then they had remained steady.

For the July-September quarter, PPF and National Savings Certificate will fetch an annual interest rate of 7.9% as compared to 8% earlier while Kisan Vikas Patra (KVP) will yield 7.6% with maturity of 113 months. At present, interest rate on KVP is 7.7% and maturity is 112 months.

The move is aimed at matching the softening of interest rates in the banking sector since the RBI cut its benchmark policy rate thrice during the year. "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 year 2019-20.

If you want to invest in safe debt investments, then you can still consider small saving instruments despite the slight reduction in interest rate, says Ramalingam K, chief financial planner at holisticinvestment.in.

"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 year 2019-20.

The girl child savings scheme Sukanya Samriddhi Account will fetch 8.4%, from 8.5%.

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

Interest rate for the five-year Senior Citizens Savings Scheme will now fetch a lower rate of interest at 8.6% from 8.7%. (With Agency Inputs)

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