The Finance Ministry on Friday raised interest rates on many small savings schemes including senior citizen savings schemes and National Savings Certificates (NSCs). However, rates on Public Provident Fund and Sukanya Samridhi were kept unchanged.
This is the second successive revision but mostly on non-tax savings schemes. New rates will be applicable on fresh deposit between January 1 and March 31. The hike is in line with upward revision of interest rates on bank deposits. Still, small savings will fetch higher than bank deposits.
According to a Finance Ministry notification, rates for deposits up to 5 years as well as NSC, senior citizen savings scheme and Kisan Vikas Patra (KVP) where income accruing is taxable have been hiked by up to 1.1 percentage points. With the revision, senior citizen savings scheme will earn 40 basis points more at 8 per cent during the January-March period. Similarly, a one-year term deposit with post offices would earn 6.6 per cent, for two years (6.8 per cent), three years (6.9 per cent) and five years (7 per cent).
With regard to KVP, the government has hiked the interest rates to 7.2 per cent, thereby maturing in 120 months. Currently, KVP yields 7 per cent rate with a maturity period of 123 months. Monthly income scheme would earn 40 basis points more at 7.1 per cent, while National Savings Certificate (NSC) has been raised by 20 basis points to 7 per cent.
The interest rate on girl child savings scheme Sukanya Samriddhi Yojana was retained at 7.6 per cent, and that for Public Provident Fund (PPF) it has been kept unchanged at 7.1 per cent. Savings deposits will continue to earn 4 per cent per annum.
Since 2016, interest rate resetting has been done based on yields of government securities of the corresponding maturity with some spread on the scheme for senior citizens, as advised by the Shyamala Gopinath Committee. However, in practice, the interest rate changes are made considering several other factors, including political ones.