Interest rates on PPF, Sukanya Samriddhi, and other small savings schemes slashed

The interest rates on small savings schemes have been reduced by a total of 120-250 bps during the current financial year.

The Government of India on Wednesday announced a cut in interest rates on small savings schemes after keeping them unchanged for the past three quarters. According to the circular issued by the Ministry of Finance on March 31, 2021, the rates of small savings schemes have been reduced by 50-100 basis points.

The interest rates on small savings schemes have been cut by massively (100 basis points/bps = 1%) for the first quarter of the financial year 2021-22. For the first time since 1974, the PPF interest rate is now below 7%, a 46 year low.

The recent announcement from the Government will be effective from April 1, 2021, post office saving schemes will fetch interest rates as follows: Public Provident Fund (PPF) – 6.4 per cent down from 7.1 percent earlier, National Savings Certificate (NSC) – 5.9 percent, down from 6.8 percent earlier, Sukanya Samriddhi Yojana (SSY) – 6.9 percent, down from 7.6 percent earlier. Post office time deposit rates across tenures have been reduced by 0.40- 1.1% and will earn in the range of 4.4- 5.3%.

 

Considering the recent cut, interest rates on small savings schemes have been reduced by a total of 120-250 bps during the current financial year.

The rates have been cut for the quarter because of the fall in the 10-year government securities (G-Sec) yield. The Shyamala Gopinath Committee had suggested that the interest rates of different small saving schemes should be 25-100 bps higher than the yields of the government bonds of similar maturity.

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