Centre announces higher returns for seniors

The Government has decided not to change small savings rate and announced a 9.0 per cent return for senior citizens.

A further softening of interest rate regime may not be possible now with the central government deciding not to change small savings rate and announcing a 9.0 per cent return for senior citizens.

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However, in the process the Centre announced its intention to wind up senior citizens scheme 'Varishta Pension Bima Yojana', with Finance Minister P Chidambaram saying, "It may no longer be necessary since the new savings schemes will cover the senior citizens adequately."

The pre-Budget Economic Survey had not ruled out interest rates moving up.

The Budget, presented in Parliament, also kept the rates untouched on Public Provident Fund, Government Provident Fund and Special Deposit Schemes at 8.0 per cent for this year.

With Chidambaram announcing the 8.0 per cent returns on SDS, which comprises 80 per cent of Employees Provident Fund's corpus of Rs 1,28,000 crore, Central Board of Trustee, which would again meet on July 13, would decide on returns it has to offer to its three crore subscribes for this year.

The meeting assumes importance in view of Chidambaram's statement that he believed that all interest rates should be aligned to the market barring "one or two" exceptions.

He also proposed to continue with Government Savings Bond carrying an interest rate of 8.0 per cent per annum.

Presenting the budget, he said, "We should maintain a benign interest rate regime that appropriately balances the legitimate claims of the savers and borrowers."