Rate of Interest on Small Saving Schemes PPF, Kisan Vikas Patra (KVP), NSC and Sukanya Samridhi kept unchanged : Government of India (GOI) has announced that the interest rates on small saving schemes like Public Provident Fund (PPF), Kisan Vikas Patra (KVP), National Saving Certificate (NSC) and Sukanya Samridhi will remain unchanged for third quarter (Oct-Dec) of this financial year starting from 1st October 2017.

Interest Rate on Small Saving Schemes PPF, KVP NSC Sukanya Samridhi
Interest Rate on Small Saving Schemes PPF, KVP NSC Sukanya Samridhi kept unchanged

Earlier in previous quarter, Government of India had slashed the interest rate on small saving schemes, except post office saving accounts by 10 basis points.

Current interest rates on Small Saving Schemes :

Instrument/Scheme ROI (01/07/2017-30/09/2017) ROI (01/10/2017-31/12/2017) Compounding Frequency
Saving Deposit 4.0 4.0 Annually
1 year Time Deposit 6.8 6.8 Quarterly
2 Year Time Deposit 6.9 6.9 Quarterly
3 Year Time Deposit 7.1 7.1 Quarterly
5 Year Time Deposit 7.6 7.6 Quarterly
5 Year Recurring Deposit 7.1 7.1 Quarterly
5 Year Senior Citizen Saving Scheme 8.3 8.3 Quarterly and Paid
5 Year Monthly Income Account 7.5 7.5 Monthly and Paid
5 Year National Saving Certificate 7.8 7.8 Annually
Public Provident Fund Schemes 7.8 7.8 Annually
Kisan Vikas Patra 7.5(will mature in 115 months) 7.5(will mature in 115 months) Annually
Sukanya Samridhi Account Scheme 8.3 8.3 Annually

 

How the Interest rates on small saving rates are changed or revised ?

In 2011, returns on small savings instruments were linked to the market, and were adjusted annually. This was done so that the interest rate on these could be pegged to the average government securities yield with similar maturity in the preceding year.

Since April 2016, interest rates of all small saving schemes have been linked to government bond yields and are now calibrated on a quarterly basis. This change was done after a substantial cut in policy rates by the Reserve Bank of India (RBI) in the year preceding this change.

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A 16 February 2016 press release by the Ministry of Finance, Government of India, said that the small savings interest rates are perceived to limit the banking sector’s ability to lower deposit rates in response to the monetary policy of the RBI.

The reduction was hence aimed at bringing these products closer to similar instruments in the banking sector such as fixed and recurring deposits.

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