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The government on Thursday provided major relief to fixed income investors, especially senior citizens, by keeping the interest rates on small savings schemes unchanged for the September-December period.

Small savings rates are reviewed every quarter and this is the sixth consecutive quarter that the government has maintained the rates.

For the current quarter, investors will continue to earn an interest of 7.1% in Public Provident Fund (PPF), 7.4% in Senior Citizen Saving Scheme (SCSS), 6.8% in National Saving Certificate (NSC) and 7.6% in Sukanya Samriddhi Yojana (SSY).

The Kisan Vikas Patra (KVP) will continue to have a tenor of 124 months, as earlier. This amounts to an interest rate of 6.9%. Interest rates on post office term deposits have been retained at 5.5-6.7% for tenors of one-five years. Post office savings accounts will continue to earn interest of 4%. The post office monthly income scheme (POMIS) will continue to earn the same interest rate as earlier, which is 6.6%.

On 31 March, the government had reduced the interest rates for the June quarter by 50-110 basis points, but the notification was cancelled a day later by Union finance minister Nirmala Sitharaman who cited oversight in the order being issued.

The rates were last revised for the June 2020 quarter. The government had reduced the interest rates on PPF by 80 basis points (bps) from 7.9%, on SCSS by 120 bps from 8.65% and on NSC by 110 bps from 7.9%.

“There was speculation that the interest rates of small savings schemes may be reduced based on the earlier rollback. However, the government has kept the rates unchanged," said Harshad Chetanwala, an investment adviser registered with the Securities and Exchange Board of India and co-founder of MyWealthGrowth.

“Traditionally, small savings schemes had offered higher returns, but investors who have a surplus may consider investing at the present rate as these investments are backed by the government and continue to offer better returns than some of the other debt investment options available," he said.

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