The government on Tuesday slashed the interest rate on small savings by up to 140 basis points (100 basis points mean 1 percentage point) for three months period starting April 1. The new rates will be applicable on fresh deposit in these schemes from Wednesday.
These schemes include National Saving Schemes (NSS), Public Provident Fund (PPF) and Kisan Vikas Patra (KVP), beside post office savings schemes. These schemes are very popular among the salaried class as these instruments are used for tax savings and the returns are much higher than bank fixed deposit.
In an office memorandum, the Department of Economic Affairs said that on the basis of the Centre’s decisions, the rates of interest on various small savings schemes for the first quarter of financial year have been revised. Accordingly, five-year NSC will fetch 6.8 per cent as against 7.9 per cent earlier. Similarly, rate of interest on PPF has been lowered to 7.1 per cent from 7.8 per cent.
On the recommendations of the Shyamala Gopinath panel, starting April 1, 2016, interest rates on 12 small savings schemes are reviewed at the end of every quarter and new rates announced for the next quarter. This revision tales place on the basis of yield of government securities.