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Small savings rate cut by 10 bps

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The government has lowered the interest rate on small saving schemes like PPF, Kisan Vikas Patra and Sukanya Samriddhi by 0.1 percentage point for the July—September quarter, a move that will prompt banks to lower deposit rates.

The rates have been lowered by 0.1 percentage point across the board compared to the April-June quarter. However, interest on savings deposits has been retained at 4% annually.

Quarterly calibration

Since April last year, interest rates of all small saving schemes have been recalibrated on a quarterly basis.A Finance Ministry notification said investments in the public provident fund (PPF) scheme will fetch a lower annual rate of 7.8%.

Kisan Vikas Patra (KVP) investments will yield 7.5% and mature in 115 months.The one for girl child savings, Sukanya Samriddhi Account Scheme, will offer 8.3% annually, from 8.4% at present. The investment on 5-year Senior Citizens Savings Scheme will yield 8.3%. The interest rate on the senior citizens scheme is paid quarterly.

Term deposits of 1-5 years will fetch a lower 6.8-7.6% that will be paid quarterly while the 5-year recurring deposit has been pegged lower at 7.1%.“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 rates for second quarter of financial year 2017-18.

While announcing the quarterly setting of interest rates, the Finance Ministry had said the rates of small saving schemes would be linked to government bond yields.The move is expected to prompt banks to lower the deposit rate in line with the small savings rate as offered by the government.

Hindustan Times New Delhi, 01st July 2017

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