Small Savings Interest Rates Hiked

New Delhi: The central government on Friday hiked the rate of interest on two small savings schemes for January-March 2024 by 10-20 basis points or bps, making it the sixth quarter in a row for increasing the interest rates on some of the saving instruments and retaining the rates for all other schemes. Now, Sukanya Samriddhi scheme will attract an increase of 20 bps interest rate at 8.2 per cent from the existing 8 per cent, while the 3-year term deposit would go up by 10 bps to 7.1 per cent from the current 7 per cent, the finance ministry said in its circular.

Small savings interest rates in all saving instruments are generally set by the government and are linked to market yields on government securities at a spread of 0-100 bps over the yield of these securities of comparable maturities. As such, when market yields on government securities rise, interest rates on small savings schemes should also be increased. The finance ministry started raising small savings’ interest rates in October-December 2022 after leaving them unchanged for nine consecutive quarters.

As per the circular, the interest rates for popular PPF and savings deposits have been retained at 7.1 per cent and 4 per cent, respectively. “The rates were the same during the December quarter. The interest rate on the Kisan Vikas Patra is 7.5 per cent and the investments will mature in 115 months, while the interest rate on the National Savings Certificate (NSC) remained unchanged at 7.7 per cent for January 1 to March 31, 2024, period. There is no increase in interest rate for the Monthly Income Scheme, and this will earn 7.4 per cent for the investors,” the ministry said.

The government notifies the interest rate on small savings schemes, majorly operated by post offices, every quarter. The Reserve Bank of India (RBI) since May 2022 has raised the benchmark-lending rate by 2.5 per cent to 6.5 per cent, prompting banks to raise interest rates on deposits as well. However, the RBI has maintained the status quo on policy rate in the last five consecutive Monetary Policy Committee meetings since February this year.