Govt Cuts Interest on PPF, KVP, NSC, Sukanya Samriddhi and other Small Saving Instrument by 70-140 bps.

Govt Cuts Interest on PPF, KVP, NSC, Sukanya Samriddhi and other Small Saving Instrument by 70-140 bps. 

   

The government revised the interest rates on small savings scheme for April-June 2020 by anywhere between 70-140 bps. 

This decision was in response to the economy affected by COVID-19. By slashing interest rate on those small savings scheme the exchequer will able to save and could divert the same money in fight against COVID-19 affected economic. 

The latest rate cuts could lead to speedier transmission of monetary policy rate cuts as the bankers have been complaining that high rates on small savings schemes prohibit them from cutting deposit rates.

The interest rate on Kisan Vikas Patra has been cut by 0.70% to 6.9%, The interest rate for 5-year Senior Citizens Savings Scheme which paid quarterly was reduced by 120 bps to 7.4% as against 8.6% earlier, while that for savings deposits was kept unchanged at 4% a year.

On 31 December, 2019, the government decided to keep interest rate in many Small Savings Schemes.

The Sukanya Samriddhi Yojana will offer 7.6% in the April-June 2020 quarter as against 8.4% during the January-March 2020 quarter.

The most popular Scheme Public Provident Fund (PPF) will now fetch 7.1% returns against 7.9% after an 80 bps cut in its interest rate.

The interest rate on National Savings Certificate (NSC) has been reduced  to 6.8% with a 1.30% cut in rate. 

The interest rate on five-year Recurring Deposit Rate sees a 140 bps cut to 5.8%.

The interest on Small Savings Schemes are revised on quarterly basis depending on market and economic condition.

Rate Comparison 

This big cut in interest rate may result in reduction in interest income by middle class and also in popularity of all above Small saving scheme. But keeping in mind the current economic environment and difficulty faced by society the reaction will mixed one