Saturday, March 2

Indian Government Hikes the Interest Rate of Small Savings Schemes

The Indian government has come up with new hikes in the interest rate on small savings schemes including public provident fund or PPF and also on Kisan Vikas Patra or KVP.

The interest rate of PPF has been altered to 8% interest rate for the October to December quarter, up from 7.6% in the current quarter. On the other hand, for the KVP, the interest rate has been taken to 7.7% from 7.3% in the current quarter. This means that KVP will now mature or double in 118 months as compared to 112 months earlier.

The announcement regarding the change in these interest rates was made by the finance ministry today. The interest rate on small savings schemes, which are benchmarked to yields on government bonds, are revised on a quarterly basis. With the 10-year benchmark yield now above 8%, many analysts had expected the government to increase the interest rate on small savings schemes.

Changes have been made in various other schemes as well that include Sukanya Samriddhi Account scheme which will now fetch 8.5% interest rate as compared to 8.1% earlier.


Talking about other schemes, the 5-year National Savings Certificate or NSC will now fetch 8%, the same rate as that of PPF, from 7.6% at present. Along with this, the interest rate on the popular 5-year Senior Citizen Savings Scheme has been increased to 8.7% which was 8.3% earlier.

Apart from these, similar changes have been made in the interest rate on post office Monthly Income Scheme or MIS. The interest, in this case, has been hiked to 7.7% from 7.3%. Likewise, the five-year post office recurring deposit or RD scheme will fetch 7.3%, from 6.9% earlier.

The interest rate on post office term deposits has also been given a rise. The five-year post office time deposit will show an interest rate of 7.8% from 7.4% earlier. Investment in 5-year post office deposit also qualifies for income tax benefits under Section 80C.

Also, the 3-year post office deposit will now fetch 7.2% (up from 6.9%), 2-year deposit 7% ( up from 6.7%) and the 1-year deposit 6.9% ( up from 6.6%). Only the post office savings deposit interest rate has been kept unchanged at 4%