After EPF rate cut, will interest rates on PPF, other small savings schemes go down?
PremiumThe Reserve Bank of India (RBI) has claimed that the interest rates on small savings schemes are higher
Amid the rising interest rates of fixed deposits (FDs), the Reserve Bank of India (RBI) has claimed that the interest rates on small savings schemes are higher. “The Government of India reviewed interest rates on small saving instruments (SSIs) on December 31, 2021, and left them unchanged for the seventh straight quarter. The current interest rates on SSIs are 42-168 bps higher than the formula-based rates for Q4:2021-22," RBI stated in its "State of the Economy" report.
In recent months, a few major banks, including SBI, HDFC Bank, ICICI Bank, Bank of Baroda, Axis Bank, have started raising interest rates on term deposits.
“Across domestic banks, private banks continue to exhibit higher pass-through to term deposit rates compared to their public sector counterparts. In recent months, a few major banks have started raising interest rates on deposits, anticipating a pick-up in credit demand,"RBI said in its report.
The government is expected to review interest rates on small savings schemes for the first quarter of 2022-23 on 31 March.
These schemes include Public Provident Fund Account (PPF ) with an interest rate of 7.1%, Sukanya Samriddhi Accounts with an interest rate of 7.6%, Senior Citizen Savings Scheme (SCSS) with an interest rate of 7.4 % per annum.
Other small savings schemes include Post Office Savings Account(SB) with an interest rate of 4% p.a., 5-Year Post Office Recurring Deposit Account (RD) with an interest rate of 5.8 % per annum, Post Office Time Deposit Account (TD) with an interest rate of 5.5% - 6.7%, Post Office Monthly Income Scheme Account (MIS) with an interest rate of 6.6 % per annum, National Savings Certificates (NSC) with an interest rate of 6.8% and Kisan Vikas Patra (KVP ) with an interest rate of 6.9 %.
The Employees’ Provident Fund Organisation (EPFO) recently cut the interest rates on EPF to a four-decade low of 8.1 per cent for 2021-22 fiscal from 8.5 per cent in the previous year. "The Central Board recommended 8.10 per cent annual rate of interest to be credited on EPF accumulations in members' accounts for the financial year 2021-22 (ending on March 31, 2022)," labour ministry statement said.
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