Government cuts interest rate on small savings schemes by 0.1%, effective July 1, for July-September quarter

The government on Friday reduced the interest rate on small savings schemes, including NSC and PPF, by 0.1 percent for the July-September quarter.

The move is aimed at matching the softening of interest rates in the banking sector since the RBI cut its benchmark policy rate thrice during the year.

Barring interest on savings deposits, which has been retained at 4 percent annually, the rate on all other schemes has been slashed by 0.1 percent.

"On the basis of the decision of the government, interest rates for small savings schemes are to be notified on a quarterly basis," the finance ministry said while notifying the rates for the second quarter of the financial year 2019-20.

Public Provident Fund (PPF) and National Savings Certificate (NSC) will fetch an annual interest rate of 7.9 percent from the existing rate of 8 percent, while Kisan Vikas Patra (KVP) will yield 7.6 percent with the maturity of 113 months.

At present, the interest rate on KVP is 7.7 percent and maturity is 112 months.

The girl child savings scheme Sukanya Samriddhi Account will fetch a lower return of 8.4 percent from 8.5 percent.

Term deposits of 1-3 years will fetch the interest rate of 6.9 percent, to be paid quarterly, while the five-year quarterly pegged at 7.7 percent and for recurring 7.2 per cent from the existing rate of 7.3 percent.

The interest rate for the five-year Senior Citizens Savings Scheme will now fetch a lower rate of interest at 8.6 percent from 8.7 percent.