Saturday, May 18, 2024

Centre raises interest rates on most small saving schemes, except PPF, for June quarter

Image used for representational purpose only.

Image used for representational purpose only.
| Photo Credit: Getty Images

The government has raised returns on most small savings schemes for the April to June quarter, barring the Public Provident Fund (PPF) whose returns have been static at 7.1% for the last three years.  

Returns on the Sukanya Samriddhi Account were, however, increased for the first time since April 2020 — from 7.6% to 8% — while the Senior Citizens Savings scheme would now fetch 8.2% instead of 8%.  

The Finance Ministry, which notified the new rates on Friday, also lifted the return on the National Savings Certificate to 7.7% from 7% and Kisan Vikas Patra to 7.5% from 7.2%. The monthly income account scheme will now deliver 7.4% returns instead of 7.1%.  

The rate of return on 1-, 2- and 3-year time deposits has been raised by 10 basis points (0.10%) for the next quarter, yielding 6.8%, 6.9% and 7%, respectively, while 5-year time deposits will earn 7.5% instead of 7%.  

The rate paid on 5-year recurring deposits is being raised from 5.8% to 6.2%. While the government had raised some small savings schemes’ rates over the last two quarters, the number of schemes with higher rates is larger this time.  

Apart from record gross market borrowings of ₹15.43 lakh crore in 2023-24, the government plans to tap small savings schemes for financing its debt, Finance Minister Nirmala Sitharaman had said in the Budget. 

“As expected, small savings interest rates have been hiked by 10-70 basis points across various instruments. This should help to garner steady deposits in the coming quarter, in light of the expected rate hike from the Reserve Bank of India’s Monetary Policy Committee in April, which would subsequently get transmitted to bank deposit rates.” said Aditi Nayar, chief economist at ICRA. 

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