Govt slashes interest rates on PPF, other small saving schemes
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In an official notification, the finance ministry said: "In exercise of the powers conferred by Rule 9(1) of the Government Savings Promotion General Rules, 2018 the rates of interest on various small savings schemes for the Q1 of FY 2021-22 have been revised."
Accordingly, interest rate of PPF have been reduced from 7.1 per cent to 6.4 per cent. While, that on NSC has been slashed to 5.9 per cent from 6.8 per cent earlier.
The new interest rate on PPF will be the lowest since 1974. According to reports, the PPF interest rate was 7 per cent between August 1974 and March 1975. Prior to that, the rate was 5.8 per cent.
The girl child savings scheme Sukanya Samriddhi Yojana will offer 6.9 per cent interest rate as against a rate of 7.5 per cent earlier. Interest rates for small savings schemes are notified by the ministry of finance on a quarterly basis.
The revised rates will come into effect from April 1 and remain effective till June 30, 2021. For the first time interest rate on savings deposits has been reduced by 0.5 per cent to 3.5 per cent from the existing 4 per cent annually.
The steepest fall of 1.1 per cent has been effected in the one-year term deposit. The new rate will be 4.4 per cent as compared to 5.5 per cent at the moment. Similarly, two-year fixed deposit will earn 0.5 per cent less at 5 per cent, three-year term deposit rate will be down by 0.4 per cent and five- year term deposit rate will be lower by 0.9 per cent at 5.8 per cent.
The annual interest rate on Kisan Vikas Patra (KVP) has been reduced by 0.7 per cent to 6.2 per cent from 6.9 per cent. The Centre had kept interest rates unchanged since the past three quarters. In April-June 2020, it had cut rates by about 70-140 bps.
While announcing the quarterly setting of interest rates in 2016, the finance ministry had said that rates of small savings schemes would be linked to government bond yields. Last month, the RBI kept interest rates static for the fourth time in a row at 4 per cent on inflationary concerns.
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