Government hikes interest rates on some small savings schemes by up to 30 bps in Q3

After a nine-quarter hiatus, the Centre on Thursday hiked the interest rate on a few small savings schemes to up to 0.3 per cent for the October-December period.

Before this, the interest rates on small savings were hiked just ahead of the 2019 Lok Sabha elections.

The schemes on which the rates have increased include the senior citizens savings scheme, Kisan Vikas Patra time deposits of two and three years.

While KVP will fetch an interest rate of 7 per cent instead of 6.9 per cent earlier, the Senior Citizens scheme will get 7.6 per cent instead of 7.4 per cent for the October-December quarter.

The interest rate on two year time deposit will increase to 5.7 per cent in place of 5.5 per cent at present. The same on three year time deposit will increase by a maximum of 30 basis points to 5.8 per cent in place of 5.5 per cent currently

The interest rate on one of the most preferred tax saving instruments Public Provided Fund has not been raised and retained at 7.1 per cent.

The new rate for KVP would be 7 per cent and the maturity period is 123 months, compared to the existing interest rate of 6.9 per cent and maturity period of 124 months.

Monthly Income Scheme would earn 10 basis points more at 6.7 per cent as compared to existing 6.6 per cent.

However, Public Provident Fund (PPF) and National Savings Certificate (NSC) will continue to have an annual interest rate of 7.1 per cent and 6.8 per cent, respectively, in the third quarter of this fiscal.

The one-year term deposit scheme of the post office will continue to earn an interest rate of 5.5 per cent in the quarter, as offered in the previous three months.

Term deposits of five years will fetch an interest rate of 6.7 per cent, to be paid quarterly, while the five-year recurring deposits will earn interest of 5.8 per cent, the same as in Q2 FY23.

The interest rate on girl child savings scheme Sukanya Samriddhi Yojana was retained at 7.6 per cent, while savings deposits will continue to earn 4 per cent per annum.

Interest rates on seven schemes were retained while hike was effected in five schemes.

The Reserve Bank since May has raised the benchmark lending rate by 140 basis points, prompting banks to raise interest rates on deposits as well.

The country's biggest lender State Bank of India (SBI) raised interest rate on one-year to less than 2 years fixed deposit by 15 basis points to 5.45 per cent in August from 5.30 per cent.

Retail inflation stood at 7 per cent in August, remaining above the RBI's tolerance level for the eight month in a row.

In a separate statement with regard to Senior Citizens' Savings Scheme (SCSS), the finance ministry said in cases where the SCSS account holder/s passes away and the account is being closed on request of the nominee/legal heir, the rate of interest as applicable on SCSS scheme would be paid till the date of demise of the account holder.

Thereafter, the interest rate applicable on Post Office Savings Account would be paid from the date of demise of the account holder till the date of final closure of the account.

Premature closure clause does not trigger on account of demise of the SCSS account holder, it said.

The premature closure of the account is applicable only when the SCSS account holder requests for closure of own SCSS account before the maturity period. In such cases of premature closure of the account, a penalty would be levied as mentioned in the rules of the SCSS, it said.

(With PTI inputs)