The government has increased the interest rates of small savings schemes by up to 30 bps for the July-September 2023 quarter. On June 30, 2023, the Ministry of Finance has issued a circular announcing (one percentage point is equal to 100 basis points)
The government has increased the interest rates of small savings schemes by up to 30 bps for the July-September 2023 quarter. On June 30, 2023, the Finance Ministry has issued a circular announcing (one percentage point is equal to 100 basis points) interest rates on schemes like 1- and 2-year Post Office Time Deposit, 5-year Recurring Deposit increased . The interest rate on Public Provident Fund (PPF) has once again been kept unchanged at 7.1 per cent.
How are the interest rates for small savings schemes determined?
The interest rates available on small savings schemes are reviewed by the government on a quarterly basis. The formula for calculating interest rates for small savings scheme was given by Shyamala Gopinath Committee. In which the committee suggested that the interest rates of various schemes should be 25-100 bps higher than government bonds of similar maturity.
When was the last time the interest rates were increased?
The government increased the interest rates of small savings schemes by up to 70 bps for the April-June 2023 quarter. Interest rates have been increased on schemes like Senior Citizen Savings Scheme, Monthly Income Savings Scheme, National Savings Certificate, Kisan Vikas Patra, all Post Office Fixed Deposits and Sukanya Samriddhi Account Scheme. The interest rate on Public Provident Fund (PPF) has once again been kept unchanged at 7.1%.
The Reserve Bank of India (RBI) has been increasing interest rates since May 2022. Due to this, many banks had also increased the interest rates on their FDs. Which also benefited the investors. This is good news for FD investors who have been sitting with low interest rates for decades. Since the last two policy meetings, the RBI has kept the rates on hold, which means the interest rates remain unchanged.
Which is better FD, bank savings accounts or small savings schemes?
Even though banks have started increasing interest rates on FDs, many small savings schemes are still offering higher interest rates. In which the schemes of big banks are also included.
For a period of 7 days to 10 years, a return of 3 percent to 7 percent is available on SBI’s FD. In which senior citizens get 0.5 percent more interest. Apart from fixed deposits, the interest rates on savings accounts offered by some big banks are lower than the interest rate on post office savings account. Presently the post office savings account is getting interest at the rate of 4% per annum. Whereas SBI is paying interest at the rate of 2.70% per annum on its savings account. Similarly, ICICI Bank is offering 3-3.5% per annum.
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