Savings scheme

Small Savings Scheme: Government keeps interest rate on PPF unchanged, other NSCs unchanged

The central government on Thursday kept interest rates on small savings schemes, such as the Public Provident Fund (PPF) and the National Savings Certificate (NSC), unchanged for the July-September quarter of the year. 23 in an environment of high inflation and rising interest rates.

This is the ninth consecutive quarter that interest rates for small savers have not changed. The interest rate for small savings has not been revised since the first quarter of 2020-21.

New investments made during the second quarter of fiscal year 2022-23 in these plans will also earn the same interest rates as in the previous quarter.

The PPF will continue to gain 7.10%. The Senior Citizens’ Savings Scheme (SCSS) will continue to yield 7.40 percent and post office term deposits 5.5 to 6.7 percent, the finance ministry said.

Interest rates for small savings schemes are revised quarterly, based on the evolution of benchmark government bonds of similar maturity. During the last quarter, the government had decided to maintain the status quo.

The Shyamala Gopinath committee in 2011 had recommended making the small savings plan market linked.

Analysts had indicated a possibility that interest rates could be raised this time around given the rise in G-Sec yields over the past quarter. To date, the Indian 10-year bond yield was 7.424%, down from 6.843% on March 31. Notably, the Reserve Bank of India (RBI) also raised the policy rate by 90 basis points during the April-June quarter.

Amid rising inflation, the government in March kept interest rates unchanged for small savings schemes, including PPF and NSC, for the first quarter of 2022-23.

PPF and NSC will continue to bear an annual interest rate of 7.1% and 6.8%, respectively, in the first quarter of next fiscal year.

“The interest rate of the various small savings plans for the first quarter of the financial year 2022-23, beginning on April 1, 2022 and ending on June 30, 2022, will remain unchanged from the prevailing rates applicable for the fourth quarter (January 1, 2022 to March 31, 2022) for fiscal year 2021-22,” the finance ministry said in an earlier notification.

The one-year term deposit scheme will continue to generate an interest rate of 5.5% in the first quarter of next fiscal year, while the Sukanya Samriddhi Yojana girls’ savings scheme will reach 7.6%.

It should be noted that the largest lender in the country, the State Bank of India (SBI), offers an interest rate of 5% on a one-year fixed deposit.

The interest rate on the 5-year PEE will be maintained at 7.4%. Interest from the seniors’ scheme is paid on a quarterly basis.

The interest rate on savings deposits will remain at 4% per annum.

One to five year term deposits will earn an interest rate of between 5.5 and 6.7%, payable quarterly, while the interest rate on five year recurring deposits will earn a higher interest rate of 5.8%.

Recently, the Provident Fund (PF) rate was reduced to its lowest level in four decades of 8.1% for 2021-22, down from 8.5%.

Defending the proposal to cut the interest rate paid on employee provident fund deposits, Finance Minister Nirmala Sitharaman earlier this month said the rate was dictated by today’s realities where the interest rate on other small savings instruments was even lower.

FM Sitharaman had also quoted the prevailing comparative interest rates of other schemes, saying that Sukanya Samriddhi Yojana offers 7.6%, the savings scheme for the elderly (7.4%) and the PPF (7. 1%) while SBI’s 5-10 year fixed deposits yield 5.50%.

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