On September 29, 2022, the Ministry of Finance increased the interest rates on five of 12 small savings schemes for Q3FY23 (October-December) while other interest rates kept unchanged.
- An increase behind interest rates amid higher inflation rate and a rising interest rate cycle.
- This is the first time small savings rates have been hiked since the January to March quarter (Q4) of 2019.
Small savings rates for Kisan Vikas Patra (7%), 2-year time deposit (5.7%), 3-year time deposit (5.8%), senior citizen savings schemes (7.6%) and monthly income account (6.7%) were increased by 10 bps, 20 bps, 30 bps, 20 bps and 10 bps respectively.
Table showing New Rates:
| Scheme | Rate | Increase (Basis Points/BPS) | Maturity (years) | Compounding Frequency | Minimum amount for Opening Account (Rs) |
|---|---|---|---|---|---|
| Kisan Vikas Patra | 7% | 10 | 123 months | Annually | 1000 |
| 2-year time deposit | 5.70% | 20 | 2 | Quarterly | 1000 |
| 3-year time deposit | 5.80% | 30 | 3 | Quarterly | 1000 |
| Senior Citizen Savings Schemes | 7.60% | 20 | 5 | Quarterly and paid | 1000 |
| Monthly Income Account | 6.70% | 10 | 5 | Monthly and paid | 1000 |
| Rates that Kept Unchanged | |||||
| Savings deposit scheme | 4% | – | – | Annually | 500 |
| 1-year Time Deposit | 5.50% | – | 1 | Quarterly | 1000 |
| 5-year Time Deposit | 6.70% | – | 5 | Quarterly | 1000 |
| 5-year Recurring Deposit | 5.80% | – | 5 | Quarterly | 100/month |
| National Savings Certificate | 6.80% | – | 5 | Annually | 1000 |
| Public Provident Fund Scheme | 7.10% | – | 15 | Annually | 500 |
| Sukanya Samriddhi Account scheme | 7.60% | – | 21 | Annually | 250 |
Key Points:
i.For Kisan Vikas Patra, the Ministry of Finance reduced the maturity period to 123 months from 124 months earlier.
ii.Since April 1, 2016, the Ministry of Finance is quarterly review the small savings rates.
iii.The recent retail inflation print for August came in at 7%, marking the eighth month above the upper threshold of the RBI’s target of 4 +/- 2%, and almost three years (35 months) of staying above 4%.
iv.An hike in rate will balance the interests of senior citizens, persons saving in instruments without tax benefits along with keeping the interest rate for small savings in check.
Recent Related News:
i.As per the Ministry of Finance notification, those who pay income tax will not be allowed to enrol in the Government’s Social Security Scheme Atal Pension Yojana (APY) from October 1, 2022.
ii.On 21st July 2022, the Pradhan Mantri Vaya Vandana Yojana completed five years, the scheme was formally launched in 2017 by the Ministry of Finance. The programme is a social security programme for the elderly that aims to provide them with a guaranteed minimum pension based on a guaranteed return on the purchase price or subscription fee.
About Ministry of Finance:
Union Minister– Nirmala Sitharaman (RajyaSabha – Karnataka)
Ministers of State (MoS) – Pankaj Chaudhary (Constituency – Maharajganj, Uttar Pradesh); Dr. Bhagwat Kishanrao Karad (Constituency – Rajya sabha Maharashtra)
