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Centre reduced small savings schemes interest rates for Q1FY20-21; PPF int. lowered to 7.1%

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On March 31, 2020, the Central government has decreased the Interest Rates on small savings schemes for the first quarter (Q1-April to June) of FY 2020-21 by exercising the powers conferred under Rule 9(1) of the Government Saving Promotion General Rules, 2018. This move has been suggested by the Economic Survey 2019-2020 to bring small savings schemes interest rates on the lines of bank deposit rates which had also been reduced on fixed deposits (FDs). Also, the high small savings interest rates for bid banks to cut their deposit rates immediately.Starting from April 1, 2020, to 30th June 2020.Government cuts interest rates on NSC, PPF

  • It should be noted that the Interest rate on public provident fund (PPF) scheme has been lowered to 7.1 % for Q1FY 20-21 which is the lowest interest rate offered since 1977 or lowest in 43 years.

Following table showing the new interest rate rates with effect from April 1, 2020:


InstrumentPrevious Interest rate (%) New Interest rate (%) % ChangeCompounding frequency
Savings deposit440Annually
1 year Time Deposit6.95.5-1.4Quarterly
2 year Time Deposit6.95.5-1.4Quarterly
3 year Time Deposit6.95.5-1.4Quarterly
5 year Time Deposit7.76.7-1Quarterly
5 year Recurring Deposit7.25.8-1.4Quarterly
5 year Senior Citizen Savings Scheme8.67.4-1.2Quarterly and Paid
5 year Monthly Income Account7.66.6-1Monthly and Paid
5 year National Savings Certificate7.96.8-1.1Annually
Public Provident Fund7.97.1-0.8Annually
KisanVikas Patra7.66.9-0.7Annually


Important Static Points regarding small saving schemes
The interest rates on small savings schemes are reviewed every quarter by the government. The formula to arrive at the interest rates of the small savings schemes was given by the Shyamala Gopinath Committee. Following is the brief information about small saving schemes

National Savings Certificate (NSC)
The National Savings Certificate is a fixed income investment scheme that one can open with any post office. Investments of up to Rs.1.5 lakh earn tax benefits under Section 80 C of the Income Tax Act.

  • Minimum investment amount- Rs 100
  • Maximum investment amount- No Limit
  • Maturity Period- 5 years and 10 years

Public Provident Fund (PPF)
Started in 1968, PPF is the most popular long-term saving-cum-investment scheme.
Investment Limits A minimum of Rs.500.00 subject to a maximum of Rs.1,50,000 per annum may be deposited.

  • Minimum investment amount- Rs.500
  • Maximum investment amount- Rs.1,50,000
  • Maturity Period- 15-year with the facility to extend the tenure).

KisanVikas Patra (KVP)
Established in 1988, Kisan Vikas Patra is a certificate scheme from the Indian post office. Initially, it was meant for farmers to enable them to save for long-term. Now it is available for all.

  • Minimum investment amount- Rs. 1000
  • Maximum investment amount- No limit
  • Maturity Period- 124 months

SukanyasamriddhiYojana (SSY)
Started in 2014, SSY is designed to provide a bright future for girl child including tax benefits under 80c.

  • The minimum investment amount is Rs. 250 (Earlier it was Rs. 1000 in July 2018 GoI has reduced the limit)
  • Deposits in an account can be made till completion of 14 years, from the date of opening of the account
  • Maturity Period- On completion of 21 years from the date of opening of the account