ECONOMY

Government Leaves Small Savings Interest Rates Unchanged

The central government has left unchanged interest rates on small savings schemes for the second quarter of the ongoing financial year.

Following the decision, rates on most small savings instruments remain above comparable bank deposit rates.

  • The rate on a one-year time deposit stands at 5.5%

  • The return on the five-year time deposit remains at 6.7%.

  • The interest rate on Public Provident Fund scheme savings is at 7.1%.

  • The National Savings Certificate interest rate remains at 6.8%.

  • The rate on Senior Citizen Savings Scheme is at 7.4%, and on a savings deposit it will remain at 4%.

  • The Sukanya Samriddhi Account Scheme will continue to fetch an interest rate of of 7.6%.

In April, the government had first decided to slash rates on most small savings schemes to bring them in line with prevailing rates in the economy. Within hours, the government withdrew the cut, saying the notification was ”erroneously” sent.

In theory, rates on small savings instruments are to be linked to government bond yields. However, in practice, the two have often diverged. In the current situation, where incomes are under strain and inflation elevated, a cut in small savings interest rates would burden those who depend on this income.

Interest rates on small savings schemes were last reduced by 70-140 basis points in the April-June 2020 period.

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