The Department of Economic Affairs (DEA), Ministry of Finance (MoF) has announced an interest rate hike on selected small savings schemes by up to 0.3% for the 2nd quarter of the financial year 2023-24 (Q2 FY24) (i.e July 1, 2023-September 30, 2023).
- The rates are in line with the high-interest rates in the banking system.
Changed Interest Rates:
i.The interest rate for the five-year recurring deposit (RD) has been raised by 30 basis points (bps), resulting in a highest increase of 0.3%. Earlier it was 6.2%, now it is 6.5%.
ii.Interest rate has increased by 10bps for
- Th One-year term deposits with post offices will now earn 0.1% reaching 6.9% (earlier 6.8%) and,
- The two years tenor is 7% (earlier 6.9%).
Note: A basis point is equal to a 100th of a percentage point.
Unchanged Interest Rates:
i.Interest rates on term deposits for three and five years have been retained at 7% and 7.5%.
ii.The interest rates for popular Public Provident Fund(PPF) and savings deposits are kept at 7.1% and 4%,
iii.The interest rate on the National Savings Certificate (NSC) remained unchanged at 7.7% for July 1 to September 30, 2023.
iv.The girl child savings scheme Sukanya Samriddhi rate remained unchanged at 8%.
v.The interest rate on the senior citizen savings scheme and Kisan Vikas Patra (KVP) is 8.2% and 7.5%.
vi.There is no interest rate hike for the Monthly Income Scheme, and it gives investors a 7.4 percent gain.
|No.||Classifications||Rate of interest from 01.04.2023 to 30.06.2023||Rate of interestfrom 01.07.2023 to 30.09.2023|
|2||1-Year Post Office Time Deposits||6.8||6.9|
|3||2-Year Post Office Time Deposits||6.9||7.0|
|4||3-Year Post Office Time Deposits||7||7|
|5||5-Year Post Office Time Deposits||7.5||7.5|
|6||5-Year Recurring Deposits||6.2||6.5|
|7||National Saving Certificates (NSC)||7.7||7.7|
|8||Kisan Vikas Patra||7.5 (will mature in 115 months)||7.5 (will mature in 115 months)|
|9||Public Provident Fund||7.1||7.1|
|10||Sukanya Samriddhi Account||8||8|
|11||Senior Citizens Savings Scheme||8.2||8.2|
|12||Monthly Income Account||7.4||7.4|
Rate hike by RBI:
i.The Reserve Bank of India (RBI) has raised the benchmark lending rate by 2.5% since May 2023 to 6.5%, prompting banks to raise interest rates on deposits.
ii.The RBI has maintained the status quo on policy rate in the last two Monetary Policy Committee (MPC) meetings.
About Small Savings Schemes:
i.Small Savings Schemes are savings instruments managed by the government to encourage citizens to save regularly.
ii.The small savings schemes have three categories- savings deposits, social security schemes, and monthly income plan.
Setting up of interest rates:
i.Interest rates for small savings schemes are notified on a quarterly basis by the government.
ii.The formula to arrive at the interest rates for small savings scheme was given by the Shyamala Gopinath Committee in January 2023.
iii.The committee suggested that interest rates of different schemes should be 25-100 bps higher than the yields of the government bonds of similar maturity.
iv.The interest rates on small savings instruments had remained unchanged for nine consecutive quarters — from the second quarter of 2020-21 to the second quarter of 2022-23.
About Ministry of Finance:
Union Minister- Nirmala Sitharaman (Rajya Sabha-Karnataka)
Minister of State- Pankaj Chaudhary; Bhagwat Kishanrao Karad.