New Delhi: The government has hiked interest rate on small savings schemes including public provident fund or PPF, which will now fetch 8% interest rate for the October to December quarter, up from 7.6% in the current quarter. Among other small savings schemes, Sukanya Samriddhi Account scheme will now fetch 8.5% interest rate as compared to 8.1% earlier. The decision to increase small savings rate was announced by the finance ministry today. The interest rate on small savings schemes, which are benchmarked to yields on government bonds, are revised on a quarterly basis. With the 10-year benchmark yield now above 8%, many analysts had expected the government to hike interest rate on small savings schemes.
The interest rate on Kisan Vikas Patra or KVP has been hiked to 7.7% from 7.3%. This means that KVP will now mature or double in 112 months as compared to 118 months earlier.
The 5-year National Savings Certificate or NSC will now fetch 8%, the same rate as that of PPF, from 7.6% currently.
The interest rate on popular 5-year Senior Citizen Savings Scheme has been hiked to 8.7% from 8.3%.
Similarly, the interest rate on post office Monthly Income Scheme or MIS has been hiked to 7.7% from 7.3%.
The five-year post office recurring deposit or RD scheme will fetch 7.3%, from 6.9% earlier. The interest rate on post office term deposits have also been hiked. The five-year post office time deposit will offer an interest rate of 7.8%, up from 7.4%. Investment in 5-year post office deposit also qualifies for income tax benefits under Section 80C.
The 3-year post office deposit will now fetch 7.2% (up from 6.9%), 2-year deposit 7% ( up from 6.7%) and the 1-year deposit 6.9% ( up from 6.6%).
The Government announces the Revision of interest rates for Small Savings Schemes for the Third Quarter of the current Financial Year 2018-19 starting 1st October, 2018, and ending on 31st December, 2018; For full details, pl log on: https://t.co/WjpRhcqPRW
— Ministry of Finance (@FinMinIndia) September 20, 2018
The post office savings deposit interest rate has been kept unchanged at 4%.
Small savings scheme interest rate
The RBI had raised interest rate in August for the second straight meeting, but retained its “neutral” stance as it aimed to contain inflation while not choking growth. With the interest rate on small savings scheme going up sharply, banks would be under pressure to increase deposit rate.