Interest rates on some small savings schemes increased by up to 30 basis points

30 Sept 2022 , 02:33 PM

The government started passing on the hardening of interest rates to depositors on Thursday by raising rates on a few small savings plans that do not qualify for income tax benefits.

While the interest rate for the well-known PPF and NSC was kept constant, it was increased by up to 30 basis points for five other schemes where income accruing is taxed.

The adjustment comes after nine quarters of the status quo. The most recent change to the interest rate for small savings plans occurred during the first quarter of 2020—21 when rates were drastically reduced.

Interest rates for small savings plans are announced every three months.

An increase of 30 basis points for the third quarter of the current fiscal year, the revision would increase the interest rate on a three-year time deposit with post offices to 5.8% from the current 5.5%.

According to a statement from the finance ministry, the Senior Citizen Savings Scheme would earn 20 basis points extra from its current rate of 7.4%, or 7.6%, from October through December.

The government has altered the tenure and interest rates for Kisan Vikas Patra (KVP).

In contrast to the current interest rate of 6.9% and the maturity period of 124 months, the new rate for KVP would be 7% and the maturity period would be 123 months.

In comparison to the current 6.6%, the Monthly Income Scheme would earn 10 basis points more at 6.7%.

However, the annual interest rates for the Public Provident Fund (PPF) and National Savings Certificate (NSC) will remain at 7.1% and 6.8%, respectively, in the third quarter of this fiscal year.

The post office's one-year term deposit program will continue to pay 5.5% interest for the quarter as it did for the previous three months.

Five-year term deposits will earn interest at a quarterly rate of 6.7%, while five-year recurring deposits will earn interest at the same rate of 5.8% as in Q2 FY23.

Savings deposits will continue to earn 4% annually while the interest rate on the Sukanya Samriddhi Yojana, a savings program for girls, has been maintained at 7.6%.

Interest rates on seven plans were kept while the rise was effected in five schemes.

Banks upped their interest rates on deposits as a result of the Reserve Bank's 140 basis point increase in the benchmark lending rate since May.

The largest lender in the nation, the State Bank of India (SBI), increased the interest rate on a fixed deposit for one year to less than two years from 5.30% to 5.45% in August.

Retail inflation was 7% in August, exceeding the RBI's tolerance ceiling for the eighth consecutive month.

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