A large proportion of India’s population participates in the several government saving schemes. In this regard, a very important source of savings for the households in the country is made through the small saving schemes (SSSs) that include public provident fund, post office deposits, senior citizens savings scheme, time deposits and much more.
The basic objective of the government through these schemes is to support the social security as well as help in resource mobilization for the government. Talking about the interest rate of these schemes, the rate of interest is slightly high as compared to that of other financial schemes. The interest rates were expected to be hiked but to the disappointment of the fixed income group and the savers, the government has not come up with any changes in the interest rate in the small saving schemes for the second quarter of this financial year.
The interest rate on Small Saving Schemes as of 30th September 2018 are as follows:
|
INSTRUMENT |
INTEREST RATE (1st April 2018 – 30th April 2018) |
INTEREST RATE (1st July 2018 – 30th Sept 2018) |
|
Savings Deposit |
4 |
4 |
|
5 Year Recurring Deposit |
6.9 | 6.9 |
|
5 Year Senior Citizen Saving Scheme |
8.3 | 8.3 |
| Public Provident Fund (PPF) | 7.6 |
7.6 |
| Kisan Vikas Patra | 7.3 |
7.3 |
| Sukanya Samriddhi Account | 8.1 |
8.1 |
“The rates of interest on various small savings schemes for the second quarter of the financial year 2018-19 starting 1st July 2018, and ending on 30th September 2018 shall remain unchanged from those notified for the first quarter of the financial year 2018-19,” the Ministry of Finance said in a statement.
The rate of interest of the small saving schemes is calculated by adding up a mark up to the average government produce in the previous quarter. There was an expectation of the increase in interest rate but the government let the rates unchanged.
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However, the formula as stated by the Shyamala Gopinath Committee to determine the interest rates is not being devotedly followed from the previous two quarters. The committee suggests that the interest rates of various schemes should be 25-100 basis points more than the product of government bonds of the same maturity. Along with this, another suggestion passed on by the committee was that the changes in the interest rates should be made annually, but the government makes it every three months.
So, as we can witness how the government is being devoted towards not changing the interest rates of the small saving schemes, it might be a threat to the people who make savings and also for the people under fixed income segment. Also, it might be interesting to watch whether the government will bring an increase in the interest rates for the next quarter or not.