Interest Rates slashed by Government on Small Savings Scheme

On 18th March 2016,The Government of India sharply reduced interest rates on Small Savings Schemes across the Board. The government has also announced the highest reduction of 130 basis points (1.30%)  on one- year time deposit,  as per  an office order issued by the Finance Ministry.

The move has been made to align rates of these schemes to prevailing market rates.

Recently, the government has started revising interest rates on such schemes every quarter and hence, the new rates will be applicable from April 1, 2016 to June 30, 2016.

The following table will give a bird’s eye view of the changes effected.

 

Instrument

Existing Rate

(April 1 ,2015 to March 31, 2016)

New Rate

(April, , 2016 to June 30, 2016)

     

Savings Deposit

4%

4%

     

1- Year Time Deposit

8.40%

7.10%

     

2- Year Time Deposit

8.40%

7.20%

     

3- Year Time Deposit

8.40%

7.40%

     

5- Year Time Deposit

8.50%

7.90%

     

5- Year Recurring Deposit

8.40%

7.40%

     

5- Year Senior Citizen Savings Scheme

9.30%

8.60%

     

5- Year Monthly Income Account Scheme

8.40%

7.80%

     

5- Year National Savings Certificate

8.50%

8.10%

     

Public Provident Fund Scheme

8.70%

8.10%

     

KisanVikas Patra

8.70%

7.80%

     

SukanyaSamriddhi Account Scheme

9.20%

8.60%

     
     

The Government has termed this move to increase economy growth rate. No doubt, small investors will feel the pinch of reduced savings but looking at the overall economy, the measure will create parity between various loan facilities provided by bank since deposit rates have actually reduced over past 3-4 years. The banks will be able to reduce their lending rates as their cost of raising deposits will be reduced. The government will be able to decrease its interest burden and in effect reduce its revenue deficit.

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