Interest rates on small savings schemes unchanged for January-March 2017
Since April last year, interest rates of all small saving schemes have been recalibrated on a quarterly basis. For the January-March quarter, these have been kept unchanged compared with the October-December quarter.
A finance ministry notification said investments in public provident fund (PPF) scheme will continue to fetch an annual interest rate of 8 per cent, the same as 5-year National Savings Certificate.
Kisan Vikas Patra (KVP) investments will continue to yield 7.7 per cent and mature in 112 months.
The one for girl child savings, Sukanya Samriddhi Account Scheme, will continue to give out 8.5 per cent annually while it will be the same as 8.5 per cent for the 5-year Senior Citizens Savings Scheme. Interest rate on senior citizens savings scheme is paid quarterly.
A savings deposit will fetch 4 per cent interest annually while term deposits of 1-5 years will offer 7-7.8 per cent that will be paid quarterly. The 5-year recurring deposit will continue to earn you 7.3 per cent rate.
“On the basis of the decision of the government, interest rates for small savings schemes are to be notified on a quarterly basis,” the ministry said while notifying the interest rates for the fourth quarter of 2016-17 starting from January 1, 2017, and ending on March 31.
While announcing the quarterly setting of interest rates, the finance ministry had said the rates of small saving schemes will be linked to government bond yields.
The move is expected to allow banks to pass on policy rate cuts by the central bank — as and when these happen — through lower lending rates. Banks said it was high interest rates on small savings schemes that prohibited them from passing on such reduction to borrowers in a significant way.
At the first quarterly rate review in April, interest rate on the PPF scheme was cut to 8.1 per cent for April 1 to June 30, from 8.7 per cent. In July-September, the interest rate was 8.1 per cent, which was lowered to 8 per cent in October-December.
Similarly, the interest on KVP was reduced to 7.8 per cent from 8.7 per cent while the 5-year senior citizen savings scheme was to earn 8.6 per cent compared with the earlier 9.3 per cent. Also, the interest rate on Sukanya Samriddhi Account was lowered to 8.6 per cent as against 9.2 per cent previously.
Yesterday, largest lender SBI had cut benchmark interest rate across various maturities by 0.9 per cent. Also, Union Bank of India and Punjab National Bank slashed their lending rates by up to 0.7 per cent.
On Saturday, Prime Minister Narendra Modi had announced that banks will launch a scheme for senior citizens under which they will get a fixed 8 per cent return on 10-year bank deposits of up to Rs 7.5 lakh.
Senior citizens — 60 years and above — will get monthly interest under this scheme, which will shield them from any decline in interest rates.