Small Savings Schemes Interest Rates Retained For 2nd Quarter (July-September) Of Financial Year 2018-19
Government has retained the interest rates on popular Small Savings Schemes for the 2nd Quarter of the Financial Year 2018-19. Previously, Government had decided to align the small savings interest rates with the relevant market rates of Government Securities. The interest rates are now recalibrated every quarter in order to maintain it at par with the current market rates. The Small Savings Interest rates are slightly higher as compared to rates offered by Banks. The Central Bank (RBI) had been clamoring for revision in interest rates as it is leading to distortion in rate structure. Government is trying to provide a level playing field to the Banks by aligning the deposit rates to the market rates.
The interest rate was expected to be hiked given the fact that the average Government Securities yield has been higher in the recent past. Thus, there may be disappointment among Individuals expecting better returns on some of the popular investment schemes.
The interest rate was reduced by 0.2% in the last Quarter of FY 2017-18. The rates had been falling rather frequently in the last few quarters. Despite the rate cuts, investment in Public Provident Fund (PPF) and other investment schemes remains attractive when compared with other fixed return instruments. In my opinion, Individuals should look at other lucrative investment options such as Mutual Funds and Bonds.
The Government has retained the deposit rates across all Small Savings Scheme for the current quarter (July-September). The interest rate is applicable for the period starting from 1st July,’18 till 30th September,’18. The rates will be determined at par with rates of Government Securities.
Small Savings Interest Rates under various Schemes (Click on link below to read more about the Schemes)
Public Provident Fund (PPF): PPF will earn interest of 7.6% for the period 1st July,’18 till 30th September,’18. Government has also permitted premature closure of PPF account in genuine cases, such as serious ailment, higher education of children, etc applicable to accounts which have completed 5 years from the date of opening. However, a penalty of 1% reduction in interest payable on whole deposit is imposed in case of premature withdrawal.
National Savings Certificate (NSC): The 5 year NSC will earn an interest of 7.6% for the period starting 1st July,’18. The interest is compounded annually.
Kisan Vikas Patra (KVP): The interest rate has been retained at 7.3% for the Quarter ending 30th September,’18. The interest is compounded annually.
Sukanya Samriddhi Scheme (SSS): The rate has been retained at 8.1% till 30th September,’18.
Senior Citizen Savings Scheme (SCSS): The rate has been retained at 8.3% till 30th September,’18.
Post Office Schemes: Interest Rates have also been retained on Post Office Term Deposits of 1 year, 2 years, 3 years, 5 years as 6.6%, 6.7%, 6.9% and 7.4% respectively. Monthly Income Scheme (MIS) will also earn an interest of 7.4%. However, the Savings deposit will continue to fetch returns at the rate of 4%.
Small Savings Interest rates are aimed at matching the rates offered by the Banking Sectors.
This article is for informational purpose only. Readers are advised to research further to have more clarity on the topic. It is very important to do your own analysis and consult your Financial Advisor before making any investment based decision.