Small savings schemes' interest rates for April-June quarter hiked. Details here
2 min read 31 Mar 2023, 05:07 PM ISTThe interest rate for senior citizens savings scheme has been hiked to 8.2 per centHowever, the govt has kept the rate for PPF scheme unchanged for this period
PremiumThe Central Government on 31 March hiked the rate of interests on various small savings schemes including Senior Citizen Savings scheme, Sukanya Samriddhi Account scheme, Monthly Income Savings scheme, National Savings Certificate, Kisan Vikas Patra, and all post office time deposits during the April to June quarter of financial year 2023-24.
However, the government has kept the interest rate for Public Provident Fund (PPF) scheme unchanged at 7.1 per cent for this period.
The announcement was made by the Ministry of Finance on Friday. The ministry has raised the interest rate by up to 70 basis points (one percentage point is equivalent to 100 bps) on some small savings schemes for the quarter beginning 1 April.
A look at new interest rates from next month
The interest rate for senior citizens savings scheme has been hiked to 8.2 per cent from 8 per cent, for Kisan Vikas Patra to 7.5 per cent from 7.2 per cent.
The government has also increased interest rate for one, two, three, and five-year time deposits from 6.6 per cent, 6.8 per cent, 6.9 per cent, 7.0 per cent in the last quarter to 6.8 per cent, 6.9 per cent, 7.0 per cent, and 7.5 per cent, respectively.
The interest rate for Monthly Income Account scheme has also been hiked to 7.4 per cent from current 7.1 per cent. Interest rate for National Savings Certificate has been raised to 7.7 per cent from 7 per cent.
Also, Sukanya Samriddhi scheme holders will now get an interest of 8 per cent from 7.6 per cent.
"As expected, small savings interest rates have been hiked by 10-70 bps across various instruments. This should help to garner steady deposits in the coming quarter, in light of the expected rate hike from the MPC in April 2023, which would subsequently get transmitted to bank deposit rates," said Aditi Nayar, Chief Economist at ICRA.
The government has revised the interest rates on small savings schemes for the third time in last nine months. Currently, the interest rates on small savings schemes range from 4 per cent to 8.2 per cent.
The small savings interest rates, while set by the government, are linked to market yields on G-secs with a lag and are reviewed, fixed on a quarterly basis at a spread ranging from 0-100 basis points over and above G-Sec yields of comparable maturities, as per the Reserve Bank of India.
However, interest rates on small savings have not always tracked the movement in market rates.
Small savings schemes, including post office 1-3-year time deposits and 5-year recurring deposits, are savings instruments managed by the government to encourage citizens to save regularly. These also include saving certificates such as National Saving Certificates and Kisan Vikas Patra, Sukanya Samriddhi Account, and Senior Citizens Savings Scheme.
The department of economic affairs under the ministry of finance notified changes in rates in view of the rising interest rate environment.
