With effect from July 1, government has reduced interest rates on small saving schemes by 0.1%point for all of the schemes except for savings deposits. For the small savings scheme, government revises the rate quarter-on-quarter basis in line with yield on government securities in the secondary capital markets.
For the small savings scheme the rates have been unchanged as banks are unable to reduce their deposit rates and lending rates. However excess of liquidity as a result of demonetization has enabled banks to lower interest rates. For savings deposit the rates have been kept at 4%.
The interest rate on PPF have been reduced from the prevailing 7.9% to 7.8%. NSC with a maturity term of 5 years shall also get lower interest rate of 7.8% as against the previous 7.9%. Kisan Vikas Patra or KVP will fetch return of 7.5% as against 7.6%
Fixed deposits based on the maturity term will fetch returns anyway between 6.8% and 7.6%. Sukanya Samriddhi saving scheme and five-year senior citizens savings scheme shall bear 8.3% return instead of 8.4%.The rates for the small savings scheme shall be revised again on September 30.