PPF, 7 Other Savings Schemes to Fetch Lower Returns From Today

The government has cut small savings interest rates. Representational image.

(Photo: iStock)

In its steepest rate cut, the government on Tuesday, 31 March, revised interest rates on small savings schemes – some of which qualify for income tax benefits – by 80-140 basis points (0.8-1.4 percentage point). According to a Department of Economic Affairs statement, the interest rates on all but one small savings scheme stand reduced from 1 April.

“The rates of interest on various small savings schemes for the first quarter of the financial year 2020-21 starting 1 April 2020, and ending on 30 June 2020, have been revised.”

Finance Ministry notification

Currently, the Ministry of Finance offers nine types of small saving schemes, including Public Provident Fund (PPF), Kisan Vikas Patra and Sukanya Samriddhi. Interest rates for small savings schemes are notified on a quarterly basis.

Interest on savings deposits has been retained at 4 percent annually.

Here are some of the revisions notified by the Finance Ministry:

• The public provident fund or PPF scheme will now fetch 0.8 percentage points lower interest rate at 7.1 percent against the current 7.9 percent.
• National savings certificate has been cut down 1.1 percentage points from 7.9 percent, thus, will now yield 6.8 percent rate of return.
• Monthly income account will see one percentage point cut in returns at 6.6 percent against 7.6 percent at present.
• Senior Citizens Savings Scheme will earn 7.4 percent against 8.6 percent, which is 1.2 percentage points lower.
• In time and recurring deposits, the steepest cuts of 1.4 percentage points were made in one year, two-year, three-year time deposits and five-year recurring deposits.

What Does This Mean?

From Wednesday, 1 April, the money in small savings schemes, such as public provident fund (PPF), would now fetch much lower rates of return in the first quarter of 2020-21.

This is because the government went for one of the steepest cuts of up to 1.4 percentage points in these interest rates to facilitate banks to lower their rates.

The move came days after the Reserve Bank of India (RBI) announced 75 basis-points cut in policy rate.

(With inputs from PTI.)