The government has hiked interest rate on small savings schemes, in a signal to banks to raise savings deposit rates after two consecutive interest rate hikes by the Reserve Bank of India (RBI). According to a finance ministry’s statement announcing the new small savings interest rates, a public provident fund (PPF) will now get 8% interest rate for the October-December quarter, up from 7.6% in the current quarter.
The government has decided to raise interest rates of small savings schemes such as National Savings Certificate (NSC), Public Provident Fund (PPF), Kisan Vikas Patra (KVP), among others by 30-40 basis points for the upcoming quarter of the current financial year.Interest rates for small savings schemes are revised on a quarterly basis.
The last revision in interest rates were made in January-March quarter of 2017-18, After that there was no change in interest rates of small savings schemes.
In quarter ended-March, the government had reduced interest rates on such schemes by 20 basis points.
The interest rate on PPF, Senior Citizen Savings Scheme, KVP, Sukanya Samriddhi Account Scheme and five-year NCS have been increased by 40 basis points, while that of one-year, two-year, three-year time deposit has been increased by 30 basis points.
Investments in small savings schemes is important as it is one of the source for the government to generate the capital. The government’s fiscal deficit has touched Rs 5.40 lakh crore for April-July or 86.5 percent of the budgeted target of the current financial year 2018-19.