The government on Tuesday slashed interest rates on small savings schemes, including NSC and PPF, by up to 1.4 percentage points for the first quarter of 2020-21, in line with moderation in bank deposit rates.
Interest rates for small savings schemes are notified on aquarterly basis.
“The rates of interest on various small savings schemesfor the first quarter of the financial year 2020-21 starting April 1, 2020, andending on June 30, 2020, have been revised,” the finance ministry said ina notification.
With the reduction, term deposits of 1-3 years will now earnan interest rate of 5.5 per cent as against 6.9 per cent, down 1.4 percentagepoints, the notification said.
However, the interest rate on the five-year term deposit hasbeen reduced to 6.7 per cent from current rate of 7.7 per cent, it said addingthat interest rate on these are paid quarterly.
The cut in the interest rate on a 5-year recurring depositis 1.4 percentage points. The new rate for this saving instrument will be 5.8per cent.
The interest rate for the five-year Senior Citizens SavingsScheme has been lowered by 1.2 percentage points to 7.4 per cent, from theexisting 8.6 per cent. The interest on the senior citizens scheme is also paidquarterly.
However, interest on savings deposits has been retained at 4per cent annually.
The girl child savings scheme Sukanya Samriddhi Yojanaaccount will earn a lower rate of 7.6 per cent as against 8.4 per cent duringthe first quarter of the next financial year 2020-21.
The interest rate moderation for Public Provident Fund (PPF)and National Savings Certificate (NSC) for the next quarter is 0.8 percentagepoints and 1.1 percentage points, respectively, it said. The rates will nowstand at 7.1 per cent for PPF and 6.8 per cent for NSC.
The Kisan Vikas Patra (KVP) will give a lower yield of 6.9per cent with enhanced maturity period of 124 months as against 7.6 per centand 113 months maturity at present.
While announcing the quarterly setting of interest rates in 2016, the finance ministry had said the rates of small savings schemes would be linked to government bond yields.