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Interest rate on PPF cut to 8.1persent from 8.7persent

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The government on Friday slashed the interest rates on all small savings schemes, including Public Provident Fund, by 60 basis points, and Kisan Vikas Patra, by 90 basis points, to create conducive environment for the Reserve Bank of India to ease monetary policy rates further, and help banks transmit rate cuts to customers.
The new interest rates for 12 small savings schemes, including term deposits of one to five years’ maturity, five- year recurring deposit, five- year Senior Citizen Savings Scheme, five- year Monthly Income Scheme, Sukanya Samriddhi Account Scheme, and National Savings Certificate will be for the period of April 1, 2016 to June 30, 2016.
As announced by the finance ministry in February, this is different from previous years where the interest rates of such schemes were reset once a year. Now onwards, the rates will be reset every quarter, to be better linked with government securities of comparable maturity.
“This is a move to align small savings schemes to market rates and will enable banks to cut deposit rates. The government has given a signal. It is now up to the banks to act,” said Shaktikanta Das, economic affairs secretary.
Executives of public sector banks said the announcement creates space for banks to reduce interest rates on deposits further. However, the actual effect may be visible only in the next financial year since business targets for current financial year ( closing on March 31, 2015) are a priority for now.
According to RBI, the interest rates on one- year term deposits have come down by about 85- 100 basis points in past 12 months.
Business Standard, New Delhi, 19th March 2016

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