New Delhi: In a move that will hit the common&nbsp;man, the government on Friday slashed interest rates payable on&nbsp;small savings including PPF and Kisan Vikas Patra (KVP) in a&nbsp;bid to align them closer to market rates.
As a part of its February 16 decision to revise interest&nbsp;rates on small savings every quarter, the interest rate on&nbsp;Public Provident Fund (PPF) scheme will be cut to 8.1 per cent&nbsp;for the period April 1 to June 30, from 8.7 per cent, at&nbsp;present.
Similarly, the interest rate on KVP will be cut to 7.8 per&nbsp;cent from 8.7 per cent, according to a Finance Ministry order.&nbsp;
While the interest rate on Post Office savings has been&nbsp;retained at 4 per cent, the same for term deposits of one to&nbsp;five years has been cut.
The popular five-Year National Savings Certificates will&nbsp;earn an interest rate of 8.1 per cent from April 1 as against&nbsp;8.5 per cent, at present.
A five-year Monthly Income Account will fetch 7.8 per cent&nbsp;as opposed to 8.4 per cent now. Girl-child saving scheme,&nbsp;Sukanya Samriddhi Account will see interest rate of 8.6 per&nbsp;cent as against 9.2 per cent.
Senior citizen savings scheme of five-year would earn 8.6&nbsp;per cent interest compared with 9.3 per cent.
"On the basis of the decisions of the government, interest&nbsp;rates for small savings schemes are to be notified on&nbsp;quarterly basis," the order said announcing the rates for the&nbsp;first quarter of fiscal 2016-17.
Post Office term deposits of one, two and three years&nbsp;command an interest rate of 8.4 per cent but from April 1, a&nbsp;1-year Time Deposit will get 7.1 per cent, 2-year Time Deposit&nbsp;will earn 7.2 per cent and 3-Year Time Deposit will attract&nbsp;interest of 7.4 per cent.&nbsp;
Five-year time deposit will fetch 7.9 per cent interest in&nbsp;the first quarter as against 8.5 per cent while the same on&nbsp;five-year recurring deposit has been slashed to 7.4 per cent&nbsp;from 8.4 per cent.
The government had on February 16 announced moving small&nbsp;saving interest rates closer to market rates. On that day,&nbsp;rates on short-term post office deposits was cut by 0.25 per&nbsp;cent but long-term instruments such as MIS, PPF, senior&nbsp;citizen and girl child schemes were left untouched.
Post office savings of 1, 2 and 3 year term deposits, Kisan Vikas Patra (KVP) as well as 5-year Recurring Deposits till now earned 0.25 per cent higher interest than the government securities of similar tenures.
This advantage has been withdrawn with effect from April&nbsp;1, 2016, the Finance Ministry said.
On February 16, the government had left Sukanya Samriddhi&nbsp;Yojana, Senior Citizen Savings Scheme and the Monthly Income&nbsp;Scheme (MIS) -- which command 0.75 per cent, 1 per cent and&nbsp;0.25 per cent higher interest rate respectively than G-secs --&nbsp;untouched, saying they are linked to social security goals.
Similarly, long-term instruments such as 5-year term&nbsp;deposit and similar tenure National Saving Certificates as&nbsp;well as Public Provident Fund (PPF) had been left unchanged.&nbsp;But today, the interest rates on all these deposits have been cut.&nbsp;
Kisan Vikas Patra or KVP that currently provides for&nbsp;doubling of principal in 100 months (8 years and 4 months)&nbsp;will now be doubled in 110 months (9 years and 2 months) after&nbsp;the interest rate revision.
In February, the government had stated that the cut in&nbsp;small savings interest rate would help the economy move to "a&nbsp;lower overall interest rate regime eventually and thereby help&nbsp;all, particularly low-income and salaried classes".
The government has also permitted premature closure of&nbsp;PPF accounts "in genuine cases", like serious ailment or&nbsp;higher education of children.
"This shall be permitted with a penalty of 1 per cent&nbsp;reduction in interest payable on the whole deposit and only&nbsp;for the accounts having completed five years from the date of&nbsp;opening," it added.
The interest rate for every quarter would be decided on&nbsp;the 15th of the preceding month.
So, for the April-June quarter, rates should have been set&nbsp;on March 15 but they were delayed. The rates for April-June&nbsp;quarter are based on G-Sec rates that prevailed in the&nbsp;previous three months -- that is December, January and February.&nbsp;

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In a move that will hit the common&nbsp;man, the government on Friday slashed interest rates payable on&nbsp;small savings including PPF and Kisan Vikas Patra (KVP) in a&nbsp;bid to align them closer to market rates

Interest rate on Public Provident Fund cut to 8.1% from 8.7%

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Home / News / India News / Article / Interest rate on Public Provident Fund cut to 8.1% from 8.7%

Interest rate on Public Provident Fund cut to 8.1% from 8.7%

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