Finance Ministry has notified the reduction in interest rates on Small Saving Schemes for April-June 2017 quarter by 10 basis points (0.1%) as compared to Jan-Mar 2017 quarter. This move is in line with the Govt.’s practice of recalibrating the rates on quarterly basis, which is being followed since April 2016.
- While announcing this revision in interest rates, Finance Ministry added that rates of small saving schemes would be aligned with government bond yields.
- This arrangement will allow commercial banks to pass on the benefit of policy rate cuts by Reserve Bank of India (RBI) to general public by lowering the lending rate.
Post this decision, the applicable interest rate on investment in various Small Savings Schemes is as under:
| Small Saving Scheme | Interest Rate |
| Public Provident Fund (PPF) | 7.9% |
| 5-year National Savings Certificate (NSC) | 7.9% |
| Kisan Vikas Patra (KVP) | 7.6%Â – Maturity period will be 113 months as against 112 months previously |
| Sukanya Samriddhi Account | 8.4% |
| 5-year Senior Citizens Savings Scheme | 8.4% (Unchanged) |
| Savings Deposit | 4.0% (Unchanged) |
| Term Deposits (1-5 year maturity) | 6.9% to 7.7% |
| 5-year Recurring Deposit | 7.2% |
For non-senior citizen investor, Sukanya Samridhi Account fetches the highest return.
- Financial experts expect the Commercial banks to follow suit and lower the deposit rate. However Soumya Kanti Ghosh – Chief Economic Adviser of SBI has mentioned
that this should not be a concern for the public as the inflation rate too is on the decline.
Some Popular Small Saving Schemes at a Glance:
Public Provident Fund (PPF):
This scheme is a preferred long term investment option for a conservative investor. It is backed by Government of India, thus providing the dual advantage of safet
y and attractive interest rate. Returns from investment in PPF are exempted from Income T
ax.
- Minimum Investment Required: Rs. 500/-. Maximum Investment in one Financial Year: Rs. 150000/-
 Kisan Vikas Patra (KVP):
It is a savings certificate scheme which was launched by India Post in year 1988. Fearing misuse of KVP in money laundering and terrorist financing, it was closed in year 2011 on recommendations of Shayamala Gopinath Committee.
- It was re-introduced in year 2014 wherein the investor is required to complete Know Your Customer (KYC) formalities. KVP certificate is available in various denominations viz. Rs. 1000, Rs. 5000, Rs. 10000 and Rs. 50000.
- There is no upper limit for investing in KVP. Investing in KVP does not accrue any tax benefit.
