Reduction in government rates by up to 1.1% on small savings schemes

The government has drastically reduced rates on all small savings instruments for the first quarter of 2021-22, reducing the rate of return on public provident fund from 7.1% to 6.4% and affecting cuts by 40 basis points (0.4%). It has gained 110 basis points (1.1%) through a notification on Wednesday.

The quarterly interest rate offered on one-year term deposits saw a 5.5% jump in the January to March quarter, compared to 4.4% in the quarter. The rate of return on Senior Citizen Savings Scheme was cut from 7.4% to 6.5%, while the return of Sukanya Samriddhi Account Scheme was reduced from 7.6% to 6.9%.

ICRA chief economist Aditi Nair said, “After maintaining the rates in the last few quarters, the government has made a substantial improvement in small savings rates, which is a substantial improvement in small savings rates.” Limited.

The rate of interest on National Savings Certificate and Kisan Vikas Patra was also reduced from 6.8% to 5.9% and 6.9% to 6.2% respectively. Consequently, the Kisan Vikas Patra, which used to mature in 124 months, will now mature in 138 months.

While savings deposits earned the lowest 4% so far, that return has now been reduced to 3.5%. Between time deposits, the return on five-year deposits has been reduced from 6.7% to 5.8%. A five-year recurring deposit, whose interest is compounded in the quarter, will yield a return of 5.3% instead of 5.8% in the previous quarter.

For savers, the option with the highest returns at this point is the Sukanya Samriddhi Account Scheme, followed by the Senior Citizen Savings Scheme and the Public Provident Fund.