Several new rules are being implemented from today in the wake the Central government’s decisions taken earlier. Of these, small savings scheme interest rates have been hiked giving a signal to banks to raise savings deposit rates in the wake of two consecutive interest rate hikes by the Reserve Bank of India (RBI).
Earlier on Sept 19, a finance ministry’s statement had announced the new small savings interest rates.
Accordingly, Interest rates of various small savings schemes for the third quarter (October 1 to December 31) will be hiked by up to 40 bps from today, giving much relief for fixed income investors as rates have remained unchanged for the previous two quarters.
These schemes are: the Public Provident Fund (PPF), Sukanya Samriddhi Yojana (SSY), National Savings Certificate (NSC) and post office time deposits. This is being implemented in the wake of a circular issued by the Finance Ministry on September 19.
Notably, interest rates for one year, two-year and three-year time deposit have been hiked by 30 basis points, while rates for other schemes like the five-year time deposit, Sukanya Samriddhi Scheme and PPF have been increased by 40 basis points. After the hike, PPF and NSC will earn 8 percent, the Sukanya Samriddhi Scheme will fetch 8.5 percent, and the Senior Citizens’ Savings Scheme will provide 8.7 percent rate of interest.
Notably, interest rate on Kisan Vikas Patra (KVP) has also been hiked to 7.7% from 7.3%, and now the KVP will mature or double in 112 months as compared to 118 months earlier.
The RBI had raised its repo rate again in August, but retained its “neutral” stance, aiming to contain inflation and not choking growth.