The government on Thursday raised rates on some small savings schemes that do not get income tax benefit as it began passing the hardening of interest rates to depositors. While the interest rate for popular PPF and NSC were retained, rates for five other schemes where income accruing is taxable have been hiked by up to 30 basis points.
The revision comes after nine quarters of status quo. The interest rate on small savings schemes was last revised during the first quarter of 2020-21, when rates were slashed. Interest rates for small savings schemes are notified on a quarterly basis.
With the revision, a three-year time deposit with post offices would earn 5.8 per cent from the existing 5.5 per cent, an increase of 30 basis points for the third quarter of the current financial year. Senior Citizen Savings scheme will earn 20 basis points more at 7.6 per cent from the existing rate of 7.4 per cent during the October-December period, a finance ministry notification said.
With regard to Kisan Vikas Patra (KVP), the government has revised both tenure and interest rates. The new rate for KVP would be 7 percent and the maturity period is 123 months, compared to the existing interest rate of 6.9 percent and maturity period of 124 months.
Monthly Income Scheme would earn 10 basis points more at 6.7 percent as compared to existing 6.6 percent. However, Public Provident Fund (PPF) and National Savings Certificate (NSC) will continue to have an annual interest rate of 7.1 percent and 6.8 percent, 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 percent in the quarter, as offered in the previous three months. Term deposits of five years will fetch an interest rate of 6.7 percent, 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 percent 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.
