E-Paper
Centre slashes interest rates on PPF, other small savings schemes
The PPF rate has been lowered from 7.1% to 6.4% and the rate on National Savings Certificates (NSCs) has been cut from 6.8% to 5.9%.
The government on Wednesday announced a sharp cut in the interest rates on Public Provident Fund (PPF) and other small savings schemes for the June quarter.
The PPF rate has been lowered from 7.1% to 6.4% and the rate on National Savings Certificates (NSCs) has been cut from 6.8% to 5.9%. The Senior Citizens Savings Scheme (SCSS) saw its rate cut from 7.4% to 6.5% while the Sukanya Samriddhi Scheme, which was the highest paying small savings instrument, saw its rate cut from 7.6% to 6.9%. Also, the Kisan Vikas Patra (KVP) that has a tenor of 124 months will now mature in 138 months, amounting to a rate cut of 6.2% from 6.9%.
Other small savings products with interest rate reductions include post office term deposits, post office savings accounts and post office monthly income scheme. The rates on post office term deposits were reduced from 5.5%-6.7% for tenors of 1-5 years to 4.4%-5.8%. The post office savings account saw its rate reduced from 4% to 3.5%.
Interest rates on small savings schemes are reviewed every quarter. They were kept unchanged for the whole of FY21 after major cuts in April 2020 for last year’s June quarter. The interest rate on the Government of India Savings Bonds (Taxable), also popularly known as the RBI bonds, is linked to the NSC interest rate. As a result, this too will fall in June 2021 from 7.15% to 6.25%, a cut of 90 basis points.
“SCSS and Sukanya Samriddhi are still attractive compared to bank fixed deposits (FDs). PPF also retains a strong advantage due to its tax exempt status. That rate has not been cut. Investors should not use this as a reason to get into risk debt funds or even equity. Also, stay away from low-rated corporate FDs,” said Kalpesh Ashar, founder of Full Circle Financial Planners and Advisors, an investment advisor firm.
